Silver’s right tail keeps getting fatter – TDS

XAG/USD is currently attacking $28.00 as tailwinds in commodity demand are set to keep silver momentum tilted to the upside, Daniel Ghali, Commodity Strategist at TD Securities, reports.

Key quotes

“A sharp recovery in commodity demand, combined with spectacular investment demand have contributed to extraordinarily large gains, particularly as traders are disincentivized to sell their physical silver. Despite a sharp pullback in prices, speculative appetite has yet to be satisfied with retail flows still rising.” 

“Speculative appetite has also flowed into levered ETFs, which have seen their AUM rise to their highest since 2012. While this highlights the surge in investment flows, it also impacts the market structure. Rebalancing needs for these products create ‘negative gamma’ in trader parlance, which exacerbates momentum. Synonymous to CTA flows, these products add length as prices rise.” 

“Considering the outlook for silver remains positive, the negative gamma adds more fat to silver’s right tail. The US Mint is attempting to double its output of silver Eagles to meet demand, while industrial demand continues to recover. The metal’s clean positioning slate, rising demand and inventory constraints should maintain momentum to the upside.”