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Silver rally stops TD Securities out of tactical short

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(Kitco News) - After a dismal summer, the silver market appears to be making up for last ground as prices end the week at their highest level since June.

March silver futures have rallied more than 9% this past week, last trading at $23.40 an ounce. Silver is seeing its best weekly performance since August 2020. The week also caps silver's 22% gain since November.

TD Securities announced Thursday that it was stopped out of its tactical short silver position. The bank said it is booking a 14% loss after "an epic positioning squeeze contributed to a +25% rally from the October lows."

TD Securities was short silver as they expected rising U.S. interest rates combined with the growing threat of a recession would significantly weigh on the precious metal.

"Commodity demand signals still argue against the recent rally, but significant CTA short covering has sufficiently extended the pain trade in gold to lift silver prices above our stop," said Daniel Ghali, senior commodity strategist at TDS, in the updated note. "We continue to expect the investment appetite for precious metals to remain subdued in the midst of a restrictive rates regime, which suggests that a consolidation in prices could still be in the cards into 2023."

Silver's rally has significantly outperformed gold, with the gold/silver ratio falling to its lowest level since late March, last trading around 77.65 points.

Sentiment shows gold price has the momentum to move solidly above $1,800

The entire precious metals market surged higher this past week after Federal Reserve Chair Jerome Powell said on Wednesday that it could be appropriate for the U.S. central bank to slow its pace of tightening in December.

Along with shifting interest rate expectations, bullish sentiment has been building in silver as the market sees record physical demand for 2022.

In a recent panel discussion hosted by the London Bullion Market Association, Jonathan Butler, precious metals strategist at Mitsubishi Corp, said that silver has a very bright future even as it faces near-term headwinds from the Federal Reserve’s aggressive monetary policy tightening stance.

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