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Outlier (seasonal)

1980

Nelson Bunker Hunt and William Herbert Hunt

2020 - COVID 19 pandemic crisis

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There is a (recent) trend of a Silver price increase since 2020. This is indicated with the blue and red trend-channels below (May 2024 - Aug 2024). The blue trend channel is the recent 30d, and red the recent 7d.

Month and week (Price Action)

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By itself, without projecting fundamentals into this Technical Analysis, we may see a slight indication of rising prices based on the trading behaviour of others.

But we know most investors tend to lose money, so this isn’t a signal.

Open Interest

CFTC

Eurex

(Eurex is less useful. German companies use different ways to trade commodities or use international exchanges)

In a timeline chart you’d see changes (shifts) in how the producers / managed money / maybe even retailers position themselvesThe CFTC publishes the COT report. This report is the most relevant report for the Futures market. Silver is traded as a Future derivative (and other financial instruments follow the same pattern).

In the COT reports, you will find Open Interest as a column. The update frequency is weekly. Open Interest marks the number of open contracts. This indicates market interest (long and short btw.).

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Metrics for Open Interest:
Volatility (Standard Deviation): 15889.35
Average: 158040.03
Median: 157106.00
Minimum: 131956.00
Maximum: 186945.00
Typical Range: 146584.00 to 171371.00

Overall trend: Downward

Significant points:
Peak on 4: 166641.00
Peak on 12: 186945.00
Peak on 17: 175784.00
Peak on 26: 152544.00
Peak on 29: 138617.00
Trough on 6: 154724.00
Trough on 14: 161868.00
Trough on 23: 141026.00
Trough on 28: 136544.00
Trough on 30: 131956.00

Sudden changes (>5% day-to-day):
2024-07-16 00:00:00: 6.07% change
2024-07-02 00:00:00: -5.22% change
2024-06-25 00:00:00: 7.59% change
2024-06-18 00:00:00: 6.09% change
2024-05-14 00:00:00: -8.33% change
2024-05-07 00:00:00: -5.55% change
2024-04-23 00:00:00: 5.67% change
2024-03-12 00:00:00: -5.63% change
2024-01-30 00:00:00: -7.32% change

This alone would not suggest a buy / sell signal. 19 Aug 2024
But this look bearish to meNot by itself.

Committment of Traders

We assume the Silver market is known by producers. Silver producers (mines) tend to hedge their positions by shorting futures. This ensures that they can sell and benefit from the market in case of price shifts. In case of precious metals this isn’t as relevant as for soft commodities, given that soft commodities expire (turn bad).

Typically for Silver (and other precious metals) there is a gap between Producers going Long and Short. This hasn’t changed significantly in Aug 2024.

Metrics for Producer/Merchant/Processor/User Longs:
Volatility (Standard Deviation): 1.36%
Average: 3.23%
Median: 3.00%
Minimum: 0.64%
Maximum: 7.14%
Typical Range: 2.37% to 3.78%

Metrics for Producer/Merchant/Processor/User Shorts:
Volatility (Standard Deviation): 3.96%
Average: 25.57%
Median: 25.32%
Minimum: 18.08%
Maximum: 32.77%
Typical Range: 22.26% to 28.93%

Correlation between Longs and Shorts: -0.22

Assumption: if a trend in 2024 is outside the typical range of 2023, we have a signal. The producers are the source of our signal. The trend is based on the statistics of the year before.

If you like, you can perform a Chart Analysis on the Open Interest as Volumne (with AmiBroker for example).

The next logical question is: is there a seasonality in the Open Interest? Or in the supply and demand? It seems the Silver demand is going down since May 2024. There could be fundamental reasons, incl. seasonalities (elections etc.)

This Here is seems that there is a decline of Open Interest, indicating a lack of new short positions entering the market, potentially supporting the price rise. But this is a weak signal, given the Gravity Indicator (left), and the range.

This alone would not suggest a buy / sell signal. 19 Aug 2024

Looks neutral to me.

Seasonalities

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This Seasonalities are important, because they are a fundamental force how the markets move. Here we are looking at yearly cycles.

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This alone would not suggest a buy / sell signal. 19 Aug 2024

Looks bearish to me. From August to December the Silver price used to fall, from 2014-2020 (excl. 2020)

Inflation

Inflation is another fundamental market force. We can take a look at the Consumer Price Index (CPI) of the G20:, assuming that these would be the economic powers that matter for the Silver market. That is an assumption.

This would not suggest a buy / sell signal. 19 Aug 2024

Should be assessed with “News”. Why? → Silver and Gold are precious metals, that are used during turbulent times. Whether times are good or bad is of course always a matter of perception. The news sentiment matters.

News

Spot gold gained 2.1% to $2,508.82 an ounce as of 4:06 p.m. in New York. Silver and palladium advanced, while platinum was little-changed.

16 Aug 2024 (Bloomberg)

But:

https://www.reuters.com/markets/us/goldman-sachs-lowers-odds-us-recession-20-25-2024-08-19/

Goldman Sachs lowers odds of US recession to 20% from 25%
19 Aug 2024 (Reuters)

This would not suggest a buy / sell signal. 19 Aug 2024

Looks neutral to me. The US economy is relevant for the world. Recession in this market would cause fear, uncertainty and doubt. Markets tend to panic. That is not likely (20%), meaning it’s not a buy signal for Silver (or Gold).

Reports (1)

(Larry Williams)

Looks bearish until Nov '24 to me. But ask Larry

Larry Williams publishes a yearly forecast. It’s not guranteed to be right all the time, of course. Nothing ever is.

Gold

Usually Silver and Gold correlate.

Both are fear-driven investments, meaning that investors tend to secure their value with these asset classes.

Reading a Technical Analysis with instruments of Quantitative Finance in conjunction with the fundamentals

In summary so far:

• Automated Technical Analysis: slight price increase (week and month channel)

• Slight Decline of Open Interest: supports this assessment because the OI is related to supply and demand.

• We saw rising SI prices in Aug 24

• COT for Silver producers: neutral, and semi-relevant for this asset class btw. There is lots of SI in the market as it doesn’t expire like a soft commodity

• Seasonality: based on historical data we should expect a decline in Sept, but we saw a small / short trend for end of Aug. We can assume that this slight price increase is only short-term, and that the momentum of this will turn into falling prices (based on the 10y history of this market)

• Inflation: the inflation looks under control, meaning that it’s not likely that investors will turn to Silver and Gold

• News: supports the seasonality-based assessment

• Reports: Larry Williams is known as a Swing trader, meaning that a monthly cycle here would indicate a bearish position. That is supported by the Seasonality analysis, which is most relevant

• Pairs Trading: Gold and Silver often move in similar patterns. But this would be for a trading strategy raher than for an analysis here. We cannot see fear in the market. The US market isn’t collapsing, no financial crisis and Covid is over.

With indicators of Quantitative Finance you you further define:

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• The Kalman estimate is 28,65 USD for the next trade day ( 24 Aug 2024 → ) with 0,32 uncertainty. This is about 1,1 % of the price (as Kalman estimates are in the same unit). Neutral.

• The Lorentzian inidcator 0,19 indicates the same in principle: not much market turbulance to be expected; low volatility. Neutral.

• For the last 14d RSI is at 59,26. Slightly bullish (that is what the seasonal analysis concludes with), but overall neutral.