As global tension intensified, interest in silver soared. In recent days, the price of silver has soared, driving the price of silver close to 30 US dollars/ounce for the first time in 3 years. It has risen 4% last week and 13.7% so far in April. By the close of April 12, silver had risen nearly 18% in 2024 so far, surpassing gold (14.6%). Quietly, silver became hot. The biggest question is whether it can keep up the heat.

The extent to which silver futures trading volume exceeds physical supply is more serious than the cocoa market

Bloomberg macro strategist Simon White (Simon White) wrote that as a futures market, more silver is traded on exchanges than its annual physical supply. This is similar to the recent explosion of cocoa, which shows that silver is also vulnerable to speculative activity and market sentiment, leading to sharp price fluctuations. This further increases the possibility of a further spike in prices due to a surge in demand. Therefore, it is easy to imagine that silver will show a trend similar to Cocoa's recent surge.

The trend of silver and cocoa is similar

The silver market is much smaller than the gold market, yet it is notorious for its volatility. Historically, it did experience a boom similar to the recent Cocoa Bean: the Hunter Brothers silver manipulation incident in 1980, and the silver explosion in 2011.

The crazy rise in silver prices in 2011 actually did not have a single clear factor, which further proves the small size of the silver market. Instead, loose monetary policies, downgraded US debt ratings, and other factors have combined to drive demand that the market simply cannot bear.

Now, China and inflation may be driving demand for silver. As far as the latter is concerned, silver positions have risen sharply in recent weeks, probably because latecomers seeking a hedge against inflation feel they have missed out on gold. Investors around the world, particularly those in India and China, want to protect their wealth in the face of geopolitical tension.

In any case, silver is still very cheap compared to gold, which is another factor that may push its price to such an extreme as cocoa. Of course, given its extreme volatility, the price of silver is likely to fall as quickly as it rises.

Compared to gold, silver is still very cheap

An analyst said the opportunity for investors to buy gold and silver at lower prices could arise this week after Iran attacked Israel with drones and missiles last weekend.

Peter Spina, founder and president of the precious metals websites GoldSeek.com and SilverSeek.com, said that the unprecedented escalation of tension between Iran and Israel would “show fear in the market.” He said that if there is a major sell-off in the financial market — a “liquidity event,” it may have some spillover effects on precious metals. The sell-off in the stock market is likely to be the same as in the past, causing investors to look for ways to make up for their losses, including selling their precious metals holdings. Spina said:

“This could be a once in a lifetime opportunity to buy precious metals. The price of gold reflects a variety of issues and risks, and now, if these very serious events in the Middle East are not quickly mitigated, the war of terror premiums may increase.”