Page 31 - Bullion World Issue 3 July 2021

Bullion World | Issue 03 | July 2021

Now, of course, Gold to Silver ratio has
dropped. That is just indicative of Silver’s
performance.

Just a year ago, World dealt with Covid
and shutdown following to that, we had
no idea how to deal with. So everything
was essentially sold to provide liquidity
to cover margins and it was a very bad
time. Even the quintessential hedge
had a bad time. But on March 23rd
something happened that had never
happened before. The Federal Reserve
essentially gave the market unlimited
liquidity in the form of QE asset.
Purchases of 8 trillion$ balance sheet In here 2021 looked better than 2020. After the 23.4% decline from the industrial
are held by the Fed. Since then, we had side in 2020, we would get roughly 14% increase in 2021 and somewhat more and
a massive injection of liquidity. Risk asset more Increase in form of 4% in 2022.
did extremely well and so did Gold and
Silver. The investors who bought Gold Looking at the relationship between ETF holdings and the Silver price, typically the
also bought silver and just after that time higher the silver price, the more is silver ETF’s.
we had seen the net short exposure as
recorded by the CFTC turning into net
longs.

CTA’s algorithmic traders also started
to materially move away from short
exposure to long and that triggered
technicians and we have also seen a
good amount of silver investment not
only on medals and coins, which we
estimate of 200 thousand ounces. We
have seen massive ETF flows for 2020,
that was enough to move things along
and that happened even though, there
was quite a material decline on industrial
side. The mining sector produced a lot
Why is Silver trading at the very top of the cost curve? The answer is plain at this
less Silver than in 2019, so 2020 was a
point; given the very significant investment inflows and considering lacklustre mining
bad year for silver production. That’s a
activity, we were projecting deficits and ultimately it means that it’s possible to function
big offset to declining industrial demand
at the very top of the cost curve and even above the scarcities proceed. Certainly a
in 2020 but investment took over. We
metal like palladium could be the future for silver down the road. As we look out at 5G
happen to re-estimate the ETF and all
demand or motor demand the use of silver in hybrids and vehicles that are all electric
the flows into account. There was 240
have higher loadings of silver, the power cells all require that metal. It is not sure that
million ounces deficit. There was also a
we are going to get a significant rebalance seeing the market, with the long term is the
projection of deficit in 2021, where we
mining sector doesn’t keep up with demand.
were looking at less investment activity
but improved industrial activity but still a
deficit.

31