Struck out many times in history, will silver be the next Coco?

wallstreetcn ·  Apr 15 12:13

Analysts pointed out that the size of the silver market is far smaller than that of gold, and the trading volume of silver futures contracts is larger than its annual physical supply. This is similar to cocoa, and may drive silver to a sharp upward trend similar to that of cocoa.

The sharp rise in gold prices has triggered a domino effect. Since March, the increase in silver has even surpassed that of gold. Spot silver prices have increased by more than 18% so far this year, far better than the 14% increase in spot gold.

On April 13, macro analyst Simon White pointed out that the size of the silver market is far smaller than that of gold, and that the trading volume of silver futures contracts is larger than its annual physical supply. This is similar to cocoa, and is easily affected by speculative activity and market sentiment, leading to sharp price fluctuations.

Due to the recent poor harvest of cocoa beans, Ghana needs to delay delivery. Last week, the New York cocoa futures price hit a record high of 10,156 US dollars/ton. Some traders predict that cocoa futures may break through 20,000 US dollars/ton later this year.

Simon White believes that based on the similarity between the silver market and the cocoa market, there is a possibility that silver prices will rise on a large scale similar to the price of cocoa. From the late 70s to the early 80s of the last century, the Hunter Brothers manipulated the silver price incident to buy bank-guaranteed silver futures by purchasing large amounts of bank loans, hoping to control the supply of silver in the market.

In 1974, the Hunter Brothers already held 35 million ounces of silver contracts. Over the next 5 years, the Hunter Brothers actively bought silver futures. By the end of 1979, they had controlled 53% of the bank deposits on the New York Mercantile Exchange and 69% of the banks on the Chicago Mercantile Exchange, and had 120 million ounces of spot and 50 million ounces of futures.

Under the control of the Hunter Brothers, the price of silver continued to rise. By January 17, 1980, the price of silver rose from $4 per ounce to $48.7 per ounce. On January 21, the price of silver rose to an all-time high of $50.35 per ounce. This crazy speculative activity has caused the supply and demand situation of silver in the market to be out of touch with actual production and consumption, and the market price seriously deviates from its value.

Simon White explained that compared to cocoa, the trading volume of futures contracts on the silver market is larger than the actual supply, and when demand surges (for example, investors buy silver futures in large quantities), the price of silver may rise rapidly:

Taking 2011 as an example, there was a large-scale rebound in silver prices, but this rebound was driven by common factors such as loose monetary policy and the downgrade of US credit ratings, which stimulated market demand, and market supply was unable to meet this demand.

Simon White pointed out that as the rebound in US inflation is further stimulating market demand for silver, silver holdings have risen sharply in recent weeks, probably because latecomers seeking to hedge against inflation think they have missed the opportunity for gold. Compared to gold, silver is still very cheap, which may drive silver to a sharp rise in the price of cocoa.

UBS's previous research report pointed out that since many investors were caught off guard by the speed and magnitude of the rise in gold prices, at this time, silver provided investors with an opportunity to catch up. The supply and demand of silver itself is indeed tight, but it is not enough to support the sharp rise in silver prices. However, in the face of soaring gold prices, silver is naturally favored by investors as a cheaper and more volatile alternative to gold.

Investor website and Peter Spina, founder and president of, said earlier that silver has “the momentum and fundamentals” to push the price to break through the technical resistance level of $28.50 per ounce, followed by $30 per ounce. He expects the silver price to challenge $30, and there will be an obvious price retracement only after breaking through this threshold.


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