Silver Squeeze & GSR Show Price Rise Promise

There has been endless press of late around the global shortage in investment silver against rampant demand.  Mints and refineries around the world have extended wait times and increased premiums as they struggle with supply and demand.  And whilst, per the first chart below, the silver price is responding by breaching its 200 day moving average for the first time in nearly 6 months it is still relatively low (refer to the bottom chart) particularly in the context of the supply demand dynamic at present.  Current news items such as Glencore dramatically cutting production just adds to the supply squeeze.  

Whilst some may argue breaching the 200 day MA indicates ‘over bought’, another always instructive metric is the gold silver ratio which indicates otherwise.  Whilst we have previously reported on its high level in terms of its average (c45) over the last century, we don’t normally ‘zoom in’ as the next chart shows where we see its performance against, in this case, the 20 month moving average (MMA) over the last 20 years.

Previous instances of such protracted breaches of the moving average preceded strong uptrends in the silver price as can be seen below.  So whilst the silver price has responded to the current supply / demand squeeze, it still has plenty of scope for higher moves particularly in the context of current continual poor global economic projections.