Long silver ETPs see largest inflows

Nitesh Shah (pictured), director, research at WisdomTree writes that last week saw long silver ETPs receive the largest inflows in 14 weeks as price declines appeared overdone.

Long silver ETPs saw USD32.9 million in inflows which more than reversed the prior three weeks of continued outflows. The firm writes that silver prices have fallen a lot harder than gold prices this year with the price of silver down 13 per cent year to date, while gold has fallen 8 per cent.

The gold-to-silver price ratio has risen to the highest level since March 2016, indicating silver is cheap relative to gold and it appears, WisdomTree says, that some investors are positioning for a recovery in silver prices.

Copper ETPs also saw large inflows last week, their largest in six weeks. Last week saw USD13.3 million into long copper ETPs, breaking three weeks of outflows. Copper prices have been volatile in recent months, Shah writes.

“Following the price capitulation in copper between 8th June and 15th August, when prices fell cose to 22 per cent, copper prices rose over 5 per cent between August 15th and August 28th. Then between 28th August and 31st August, prices declined 2 per cent.

“The recent inflows may indicate that some investors are buying on price dips. While the constant fear that a burgeoning trade war could damage global demand for the metal, we believe that fundamentals for copper remain firm.

“The supply of refined copper will likely remain tight following the closure of Vedanta smelting facility in May 2018 (India’s second largest smelter). China is likely to repeat winter smelting curtailment this year to reduce pollution which will also keep supplies tight. The International Copper Study Group’s latest data shows that in April and May refined copper was in a supply deficit after being in a surplus from January to March.”

Last week saw the first outflow from gold ETPs in four weeks. Shah writes that despite seeing inflows at the beginning of the week, the week ended with USD8.8 million net outflows from long gold ETPs. Gold prices continued to recover last week, gaining 0.4 per cent over the prior week. However, Shah writes that a 0.6 per cent appreciation in the US dollar basket on Friday capped gains for gold. He writes that fears that the US dollar could appreciate back to levels seen earlier in August are likely to be the catalyst behind the selling of gold ETPS on Friday.

Finally, Shah comments that outflows from aluminium ETPS were at their highest level in eight weeks, reflecting a rebound in aluminium prices that started on 17th August and are likely to be a catalyst for potential profit taking.

Last week saw USD6.4 million of outflows and the week prior to that saw USD0.9 million in outflows from long aluminium ETPs coinciding with the change in prices. Shah writes that aluminium supplies have been constrained this year following sanctions on a large shareholder of Rusal, the world’s largest smelter. Also tariffs imposed by the US on aluminium imports have had their effect and disrupted supply chains.

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