Thursday, September 27, 2012

Hedge Fund Silver Holdings Closing in on Record Levels

With holdings of silver in hedge funds approaching record levels, they have taken the most bullish long position in the precious metal since February 28, according to CFTC data

As for holdings, the funds now own 18,601.4 tons through ETPs, according to data gathered by Bloomberg. That's only 0.2 percent below record levels set in April 2011.

With the open-ended implementation of QE3, silver prices could go beyond the 53 percent jump during QE1, as well as the 24 percent climb after QE2.

The high price of gold makes most investors believe silver will now outperform the yellow metal in the years ahead, including the short term. A number of experts believe silver may be the best asset to hold over the next decade.

The U.S. Commodity Futures Trading Commission shows that silver investors have increased their long positions by about ten times since June 2012.

In the latest quarter investors have gobbled up 717.2 metric tons of silver, which is valued at about $784 million. And that's only via exchanged traded funds.

Silver is being traded as protection against a weakening U.S. dollar and inflation, and with QE3 not expected to make a dent in industrial demand for about half a year, that could extend the strength of silver as investors bid it up as an alternative currency, as well as an alternative to gold, which has reached such high price levels.

So when headwinds blow against silver as it rises in price, at that time industrial demand should kick in, helping it to find significant support levels into the summer.

And if jobs in America don't increase, the Federal Reserve said it will boost the stimulus even more. That would give another big jump in the price of silver, and is almost a surety because throwing money into the economy has done nothing so far, and is very unlikely to do so any time soon - if ever.

That's good news for silver prices and investors.

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