Silver has strongly bounced back since the start of October and is back above $17 per ounce. On a pure technical standpoint, the metal is trading above its 100-day moving average with definitely more upside potential.
Gold and silver have been weighed down by the many ‘paper’ contracts banks have used and abused over the last decade. According to the most recent 13F filling from the US Securities & Exchange Commission, JPMorgan (NYSE:JPM), Commerzbank (DE:CBKG) and the Swiss National Bank have increased their stake in Wheaton Precious Metals (NYSE:WPM) (formerly Silver Wheaton). This reveals changing fundamentals: it may be a reflation trade to drive precious metals’ prices higher.
Precious metal climbed when inflation is rising (and interest rates remain steady) and while the CPI or the PCE (which are the metrics the Fed is using to measure inflation) are common indicators, we consider it underestimates consumer price growth. We rather believe that food prices metrics are a better indicators and food prices, in the US, are surging. Institutional investors are betting on a growing inflation. So should you!