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Strong silver price rebound is coming this month, says Orchid Research

Kitco News

Strong silver price rebound is coming this month, says Orchid Research

(Kitco News) With silver prices failing to remain above $18 an ounce in January, there is still hope for the white metal, according to Orchid Research, which projects a strong price rebound in February.

“We expect the positive seasonality of silver prices to play out in February,” Orchid Research said in a Seeking Alpha post published on Thursday.

The move up will be triggered by a rebound in base metals, which have been holding the metal back from further gains, the post said.

“The silver spot price made a loss of roughly 1%, underperforming gold, which enjoyed a gain of nearly 4%,” Orchid Research wrote. “We attribute its weakness to the increasing sensitivity of silver prices to the base metals, which experienced a sharp sell-off in the first month of 2020 as a result of heightened macro fears over the Coronavirus outbreak.”

With the virus fears fading, silver prices have a nice upside on top of February’s "friendly seasonality.”

“In its current trading regime, silver is increasingly influenced by the fluctuations in base metals prices. Given our view that the base metals space should experience a rebound in the course of February, on the back of abating macro fears, we expect silver's spec buying pressure to resume. This should, in turn, push SIVR higher,” Orchid Research wrote.

Between 2002 and 2019, spot silver’s gains averaged 3.7% in February, according to the research firm.

The positioning in silver also points to higher prices with speculative positioning remaining light in comparison to historical standards, the post noted.

“Silver benefits from a light spec positioning, meaning that there is plenty of dry powder to deploy on the long side in case of a positive swing in sentiment,” the research firm said. “Speculative buying pressure in silver has been muted because silver has behaved increasingly more like a base metal.”

Light positioning also means that a move up can trigger “a lot of speculative buying pressure in the silver futures markets,” Orchid Research added.

On Thursday, silver was having a great day with March Comex futures last trading at $17.81, up 1.21% on the day.

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