Investors have pushed silver’s big recent run this year via exchange-traded funds (ETFs). Take a look at the chart below.
It shows the iShares Silver Trust ETF (red line; ticker: SLV) for the past six months. You can clearly see the current rally, where the metal is flirting with the $14 mark. Since Dec last year, it’s moved up from approx. $9 to $14, marking a 61% gain. With the exception of April 2009, it’s also consistently traded above its 50-day moving average (orange line) - a good technical sign.
Investors have been piling into silver ETFs, pushing prices up
Source: Financial Times
A bullish view on silver seems to be supported by the "smart money". A report from the Commodity Futures Trading Commission observes that traders are hugely reducing their short positions, i.e. selling a borrowed commodity with the expectation that the asset’s value will fall. This will lead to more buying.
However, investment demand won’t soar to previous highs until industrial demand for silver picks up again. Total fabrication of silver - i.e. the conversion of a raw material into a finished product - has been falling over the past 12 months. So despite investors buying more, the price of silver is likely to move sideways in the immediate future.
And when the economy does indeed pick up, it’s likely that silver prices will have plenty of room to run.
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