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Strong Momentum for Gold and Silver ETFs

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Strong Momentum for Gold and Silver ETFs

silver rallyThe markets have shunned exchange-traded funds backed by precious metals over the last three years with an equal fervor to the way they piled money into these funds between 2009-2012. Gold and silver ETFs have gradually been making a comeback over the last few months.

In fact, just through the first 3 weeks of October, precious metal ETFs saw inflows of $393 million. With still another week to go in the month, it's worth taking a look at what the experts are saying about such ETFs.

Momentum Reversing

There are other encouraging signs from the precious metals markets that point to a reversal of fortunes for the precious metal ETF sector. Gold has rallied about 9% from its lows in July, as all the precious metals got a boost when the Federal Reserve chose not to raise interest rates in September.

What's more, short positions on gold have declined for 4 straight weeks to their lowest levels since March. At the same time, long positions on the yellow metal have increased for 5 consecutive weeks to their highest levels since January. For silver, shorts on the metal were nearly cut in half over the course of October, according to data from the CFTC.

Although we are seeing inflows again, there's still quite a ways to go to counteract the $90 billion in outflows from precious metal ETFs since 2012.

Silver ETFs

There has certainly been a change in fortunes for some of the most popular silver ETFs. Most popular among them is probably the iShares Silver Trust (NYSEARCA:SLV). The fund has enjoyed a surge since the month of October began, pushing its share price back above $15. This is a bullish sign that the fund may finally be ready to break out from its recent slump.

SLV has been closely followed by the smaller Physical Silver Shares ETF (NYSEARCA:SIVR), which has a slightly higher share price ($15.60) but sees only about 1% of the volumes of SLV. If you superimpose one of the two price charts on top of the other, it's nearly impossible to tell which is which. You can compare them yourself below.

SLV one-month price chart. Source: Google Finance SLV one-month price chart. Source: Google Finance
SIVR one-month price chart. Source: Google Finance SIVR one-month price chart. Source: Google Finance

Because these funds track so closely to the price of silver, the inability of the metal to sustain prices above its 200-day moving average has established strong resistance around this level for the two silver ETFs mentioned above. Nonetheless, October has been good to each of them: SLV is up 0.40% year-to-date, while the smaller SIVR is up 0.78% this year. Each fund has advanced about 5% over the last month to bring these year-on numbers back into positive territory.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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