Army of day-traders accumulating in silver? With rising prices, analysts point to $ 40 and more

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(Kitco News) Silver saw some action to disrupt trading on Thursday, with prices rising 5% on the day amid a sudden spike in investor interest.

March silver futures posted substantial gains in the morning trading session at $ 26.66, up 5.01% on the day.

The fundamentals behind silver have been solid for some time. The precious metal is even identified as an asset to outperform others in 2021, after lagging behind the market for many years. So, is your time finally here?

Analysts pointed to new money entering the silver space. They cited the growing interest in an army of day-traders likely to come from platforms like Reddit.

You don’t have to go far to find new investors interested in silver. For example, Reddit’s Wall Street Bets (WSB) has a new subreddit titled: ‘The world’s largest short squeeze $ SLV Silver $ 25 to 1000 $.’

“There is an increase in the Reddit’s WSB when it comes to SLV. It’s a type of short-coverage rally game to try to anticipate it and push it up. The SLV needs to buy futures to balance the interest rate increase too, pressing higher prices, “said RJO Futures senior commodities broker Daniel Pavilonis.

The WSB subreddit was credited for leading the GameStop grip this week. And now, analysts are not surprised to see something similar happen with silver, but with a critical difference – silver has good fundamentals and a very favorable macro environment.

“We see the same thing happening in the silver market. The Reddit reports now reference silver ETFs and silver mining companies,” LaSalle Futures Group senior market strategist Charlie Nedoss told Kitco News. “In the past, there was talk of major short transactions in silver.”

This silver trend becomes even more visible if you look at some silver stocks on Thursday morning, with First Majestic Silver (NYSE: AG) rising 40% in pre-market trading and now 30.66%, said Nedoss.

The sudden increase in its shares further forced First Majestic Silver to issue a statement: “At the request of IIROC (” Canadian Investment Industry Regulatory Organization “), First Majestic Silver Corp. wishes to confirm that it is not aware of any material , undisclosed information related to the company that would be responsible for the recent increase in the market price and turnover level of its common shares, “the company said on Thursday.

This is not so surprising, given the impact that day-traders have had on the stock markets this year, Nedoss recalled.

Whether Reddit traders are grouping or not, the increased interest in silver can trigger a powerful price movement, said Pavilonis.

“Silver has a lot of potential. Just have a good story that attracts people who don’t usually look at metals and bring it to the foreground,” he told Kitco News.

And the prospects for silver for 2021 are very promising, which is why the all-time highs of $ 50 are at stake, Pavilonis noted. “If we get out of the $ 29 level, there will be outdoor space up to $ 50. We could start closing down close to that. A move to $ 40 is a probability and can happen very quickly.”

From a technical perspective, silver has spent the past few weeks testing its $ 25.20 50-day moving average, Nedoss noted, adding that the metal could easily reach $ 30 if the $ 28.10 level is breached.

“On the positive side, I’m looking at where we sold before – $ 27.33. If we take that out, we can test $ 28.10, and a close above that results in $ 30,” he noted.

Silver drivers

The main drivers of silver this year are inflation, stimulus, economic recovery and scarcity of supply.

More and more people are realizing that inflation may pose a serious risk this year, as governments continue to print more money, said Pavilonis.

“Ultimately, people are looking a little further, as COVID cases are falling. States will open as vaccines are on the way, along with more stimuli. People are putting this puzzle together and seeing that there will be more inflation, ”he said. “With more money being printed and high inflation, we can see silver prices much higher.”

The biggest highlight of silver this year is its role as protection against inflation, said Pavilonis. “If we look at a period of inflation as we saw in 1970-80, silver will perform as well as it did. Even with the Fed raising rates to the highest levels at that time, silver rose to $ 50.”

In addition, there are still supply problems, and as the economy begins to recover and EV history becomes more prominent in the U.S., silver will be seen as a green metal that is also relatively inexpensive, added Pavilonis.