Is silver a buy or a sell at the moment?

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Silver prices have risen 38.3% since the beginning of the year, compared to 25.7% for gold.
Physical demand for silver in 2019 is up 12.3% compared to 2018.
Silver bulls must break $27 daily/weekly to open the door for a journey above the $30 mark

Similar to other precious metals, silver’s performance this year was outstanding. The price of silver has risen by 38.3% since the beginning of the year, compared to the gold price of 25.7%.

Fundamental Analysis: High Demand

Most of this increase occurred in the third quarter, when silver prices rose 33%. Demand for silver has recently gone through the roof and the Silver Institute has divided this demand into 5 groups: industry, photography, jewelry, silverware and physical investment.

In four of these groups, demand in 2019 was slightly lower compared to the previous year. However, in the industrial category, the demand for solar panels increased by 6.7%.

However, the strongest increase was seen in physical demand, where demand for silver in 2019 increased by 12.3% compared to 2018. Analysts expect this trend to continue this year thanks to the impressive price increase since the beginning of the year.

In addition, analysts at investment bank Goldman Sachs estimated that global solar installations will grow by 50% between 2019 and 2023 as demand for silver for green energy increases.

One of the signs indicating the “stickiness” of ETF purchases of silver was noted in the activities of Robinhood account holders.

Since the SIL ETF sold off its silver holdings in March, four distinct periods of weakness have been noted.  The number of SIL account holders declined slightly in March, but thereafter they hardly weakened at all, even after a price decline.

Technical analysis: Buyers’ eye level above $30

The so-called “smart money” silver hedges are missing about 56,000 contracts, indicating that an upward movement is not yet likely. Given the metal’s performance in 2020, there could be a prolonged consolidation before another rally takes place.

Silver Weekly Chart (TradingView)

To end the consolidation, silver would probably need to move north of the $27 mark. The horizontal resistance is at around $26, while the descending trend line connecting two recent momentum highs is now at around $27. If silver buyers break through this resistance, look for a move to $30.60.

Summary

Silver prices have skyrocketed this year, with a 38.3% increase since early 2020 thanks to an extraordinary increase in demand in various categories, particularly physical goods. A move above $27 on a daily/weekly basis should open the door for a journey above $30.

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