Bitcoin's Weakness Means Renewed Strength In Silver - Hecht
(Kitco News)- Bitcoin’s fall below $8,000 on Tuesday, hitting atwo-week low, could reignite interest in the silver market, according to onecommodity analyst.
Andrew Hecht, creator of the Hecht Commodity report wrotein a recent post on seekingalpha.com that one of the reasons why silverunderperformed within the precious metals sector, is because it faced toughcompetition from cryptocurrencies; in particular, unprecedented momentum that pushedbitcoin to a high of $19,000 by the end of 2017.
“In the world of speculation, the price appreciationbecomes a strong magnet as the bullish move was nothing short of spectacular,”he said.
However, he expects the trend to start reversing as bitcoinprices remain in a strong downtrend. Bitcoin’s recent fall to just under $8,000represents a 58% fall from its December highs.
“While cryptos were all the rage in 2017, it is possiblethat many traders and those seeking wide price variance will once again startwatching the price of silver,” he said.
Not only does Hecht expect liquidity to flow back intosilver, but he added that on a technical basis, silver looks ready for a moveupwards when compared to the recent uptrend in gold ’s prices.
“As gold is approaching its 2016 high, silver has lots ofcatching up to do which could mean that buyers will find their way back to themarket,” he said. “I am surprised that the precious metal has not broken to theupside along with gold, but as that sentiment rises in the market we could seea return of buying to the silver market sooner rather than later.”
The report said that gold’s rally after the last Fedannouncement occurred with “higher than average volume and rising open interest,”which are bullish signs for gold. Technical patterns indicate that gold’strajectory could take it to above $1,400 an ounce in 2018.
Other reasons for silver’s climb upwards are adepreciating dollar and global inflationary forces, he said.
Precious metals, including silver, have historically heldan inverse relationship with the dollar. Thus, dollar weakness presents atailwind for silver prices.
Both gold and silver have performed well during pastinflationary periods. “A decade of accommodative monetary policies by centralbanks is likely to cause rising prices with all of the liquidity still flowingaround markets,” the report said.
By David LinFor Kitco News
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