The recent outperformance against gold was extended on Monday after silver managed to break above its 50-day moving average, a level that now provides support at $20.33/oz while the next level of resistance is not far away at $20.85/oz, a break above which may signal a potential extension back towards the June high around $22.50/oz. Just like the downside was driven by industrial metal weakness the recent bounce has been supported by a recovery in copper.
The potential for an improved demand outlook in China and BHP's announcement that it has made an offer for OZ Minerals and its nickel and copper-focused assets, is the latest in a series of global acquisitions aimed at shoring up supplies of essential metals for the energy transition. With its high electrical conductivity, copper supports all the electronics we use, from smartphones to medical equipment. It already underpins our existing electricity systems, and it is crucial to the electrification process needed over the coming years in order to reduce demand for energy derived from fossil fuels.
Money managers and other large speculators have, because of weeks of price weakness, accumulated a net short position in both metals. Before the latest recovery in risk sentiment towards the two metals, funds held a 54.4k contracts gross short (red area in the charts below) in silver, the highest in three years, while the gross HG copper short had reached 66k contracts, a 28-month high.