Money Managers Increase Net Long Positions for Silver

The actions of professional money managers are watched carefully because of their purported insights and savvy concerning market trends, particularly over the short-term. That is why the recent announcement of record holdings of silver has gotten such attention from people who invest in silver and gold. ¹

Continued Buying to Record Levels

Recent reports show that those money managers again increased total net-long positions in silver, making this the fourth of such increases in the last five weeks. Most interestingly, the most recent silver buying comes in the face of a slight pullback in continued price increases.

Shree Kargutkar, associate portfolio manager for $7-billion Sprott Assett Management, notes, “The intensity of bullishness that has come into this space in the last four months has just been mind-blowing. Silver’s done very impressively this year.”

If the interest remains high, many analysts point to some solid reasons for continued buying. These include:

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• The growing belief that the Federal Reserve’s intention to increase the pace of interest rate increases will be slowed down and the market will see minimal additional rate bumps, if any
• The fact that demand for silver continues to grow at an increasing rate for many applications, particularly in industrial, jewelry, electronics and green energy uses, especially in solar panels.
• Declining output from mines, with only 784.8 million ounces of new production are projected for 2016, a decline of 2.5 percent from last year, as reported by research firm CPM Group. Add to this factor a declining availability of scrap and secondary sources for silver.

Combined with world economic issues, these dynamics are behind the recent Bank of America Merrill Lynch prediction of an 8 percent increase in the price of an ounce of silver to $16.47 in 2016. Underlying this forecast is the fact that bank analysts see “fundamentals are now the strongest in years.”

Positive for All Precious Metals

Of course, these and other factors seen as bullish for precious metal prices are also playing in the gold markets. The overall Commitment of Traders report also shows increasingly stronger positions, and bodes well for the longer-term upward pressures on prices. ²

In fact, even some analysts who feel the current rise has left both silver and gold overbought see the longer-term trend as quite bullish. It is this continuing growth in strong fundamentals that has many prudent investors buying gold and silver for portfolios that are focused on future value and are immune to near-term market fluctuations.

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