Silver could be headed for an “explosive” move as demand for the metal picks both as commodity and for investment purposes, said TD Securities. TDS has recently argued that silver was increasingly trading as an industrial metal.
“While deteriorating industrial demand has provided a strong headwind against silver prices (leading silver’s performance to lag gold’s), our firming real-time commodity demand indicator suggests it may now become a tailwind,” TDS said.
“Indeed, a simple analysis extracting the (rolling) regression coefficient of silver’s returns as a function of gold’s and our commodity demand indicator suggested that silver has increasingly been driven by commodity demand.”
Meanwhile, silver inflows have occurred into exchange-traded funds, along with gold. Interest from Commodity Trading Advisers has been low, but this means potential for buying. “That being said, inasmuch as commodity demand continues to firm, the context of rising investment flows in precious metals, combined with rising commodity demand, creates the set-up for explosive performance — particularly considering the constrained supply-side and low speculative interest,” TDS concluded.