Silver acting like ‘gold on steroids’ as assets near record high

(June 13, 2016 - by Eddie van der Walt, Bloomberg)

For all the talk about a collapse in commodities, investors are close to making the biggest bet ever on silver.

Silver funds have taken in a wave of new cash this year and assets are approaching an all-time high. Prices are up 23% in 2016, following a similar rally in gold on speculation the Federal Reserve will hold off on raising interest rates.

“We’re still seeing big chunks of managed money coming into the silver market,” Adrian Ash, head of research at online-trading service BullionVault, said by phone from London. “Inflows from our clients match those at the all-time highs of early 2011.”

“Silver has gone mental as it sometimes does,” he said. “It’s gold on steroids.”

Silver is often used as a more volatile play on gold’s inflation and risk-hedging properties. The performance this year has beaten other precious metals — gold, platinum and palladium. While silver funds have seen a surge in popularity, they’re still a tiny part of the market compared to gold.

Silver Funds

Total holdings are worth $12.1 billion, according to data compiled by Bloomberg. That’s just 15% of the amount invested in bullion funds.

Exchange-traded funds backed by silver have seen assets increase for the past eight days, rising within 0.6% of a record, according to data compiled by Bloomberg as of Wednesday. ETF holdings of the metal are up 6.4% this year to 20 067 metric tons.

Silver for immediate delivery was little changed at $17.0623 an ounce as of 12:11pm in London, according to Bloomberg generic pricing. The metal touched the highest in a year in May.