(Dec 8): Silver wavered after climbing more than 2% in the previous session, as inflows to exchange-traded funds backed by the metal had their strongest week since July. Gold edged up.
The white metal fell toward US$58 an ounce on Monday (Dec 8), having earlier jumped to within a dollar of a record. Total holdings of silver-backed ETFs rose by nearly 590 tonnes last week, a strong bet by investors that the metal’s rally still has further to run despite concerns it’s overheated.
Silver’s recent surge — it peaked at US$59.3336 on Friday — has been supported by increased expectations that the Federal Reserve will lower interest rates this week, a tailwind for non-yielding precious metals. The market is also still dealing with the aftershocks of a historic short squeeze in London.
“The current rally does appear frothy and retail investors are demonstrating some momentum-chasing behaviour,” said Justin Lin, a Sydney-based investment analyst at Global X Management Co.
Silver has more than doubled in value this year, with the rally gaining momentum since that severe shortage in October. Lease rates — which represent the annualised cost of borrowing metal in London — remain elevated at around 6%, even after a record amount of metal flowed into the world’s biggest silver-trading hub. These flows in turn have put other centres under pressure: Shanghai’s inventories are near their lowest in a decade.
See also: China’s PBOC extends gold-buying streak as metal’s rally cools
Further supporting the metal, options on Comex silver futures have experienced a buying spree as investors position themselves against wider swings and especially further rallies. Retail traders are pouring into the market, with five-day average volume on micro futures contracts at a level only exceeded in mid-October, CME Group Inc data show.
Meanwhile, China’s central bank added to its gold reserves for a 13th straight month, according to data released on Sunday, bringing the total to around 74.12 million troy ounces.
Silver fell 0.2% to US$58.2268 an ounce as of 9.04am Singapore time. Gold was up 0.2% at US$4,205.21 an ounce, after ending last week about 1% lower. The Bloomberg Dollar Spot Index was down 0.1%. Platinum rose, while palladium fell.
Uploaded by Arion Yeow
