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How Are Funds Flowing to Silver?

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Precious metals on July 1

On Friday, July 1, 2016, gold, silver, platinum, and palladium rose significantly by 1.4%, 5.2%, 3.2%, and 1.4%, respectively. Silver was the best-performing precious metal that day. Gains in silver were already above gold on a year-to-date basis. On a 30-day trailing basis, it rose a whopping 22.5%. Gold had a 30-day trailing rise of only 9.6% as of Friday.

Demands for gold and silver have risen this year due to the haven bids that followed the global unrest. According to Commitments of Traders data, silver net-long contracts recorded a new high of 77,662 contracts in the week to June 28 and increased more than 50% in the last three weeks.

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Fund flows to silver

Silver-based funds such as the iShares Silver Trust (SLV) and the Global X Silver Miners ETF (SIL) have risen 21.1% and 26.4%, respectively, on a 30-day trailing basis. Commerzbank reported that silver-backed funds saw inflows of as much as 137.3 tons in June. Although the above graph shows a steep decline in funds flowing to SLV in the middle of June, a quick rebound is expected.

What can we expect?

Even after the continuous positive sentiment in the Markets, French bank Société Générale is expecting silver to average $18 for the rest of the year before trailing off to $17.50 in 2017 and $15 by 2021. It sees gold prices averaging $1,330 per ounce in the current quarter and $1,350 in the fourth quarter of 2016 and first quarter of 2017.

Mining shares that were among the best performers on July 1 include Primero Mining (PPP), Alacer Gold (ASR), and B2Gold (BTG).

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