Gold News

Gold Price Tries $2200 Again, Silver ETF Inflows Diverge US vs. Europe

GOLD and SILVER prices fell back from a brief spike in London trade Tuesday, reversing earlier gains amid a mixed picture for bullion-backed ETF investment fund flows as global stock markets rallied towards last week's fresh all-time highs.
With new data showing a stronger-than-expected rebound in US durable goods orders for last month, plus further increases in the average US house price, gold dropped over $20 per Troy ounce from this morning's brief touch of $2200 – a new all-time high when reached last Wednesday night after the US Fed confirmed it still plans to cut Dollar interest rates 3 times this year.
Silver meantime reversed a 50-cent spike before falling towards 3-week lows, down more than $1 from last Thursday's 10-month high and dropping to $24.45 per Troy ounce despite inflows to European-listed ETF the PHAG continuing to offset outflows from New York-listed trust fund the SLV.
"Silver has been trailing gold lately," says a trading note from precious metals strategist Nicky Shiels at Swiss bullion refiners and finance group MKS Pamp.
"[But] with expected easier monetary policy [thanks to US, Eurozone and UK central bankers] now collectively tolerating a 'higher for longer' inflation regime, high beta cyclical commodities like silver should outperform."
Last week's peak at $25.77 was followed by silver's "usual vicious reverse," says bullion-market expert Rhona O'Connell, now at brokerage StoneX, "[alongside] a massive speculative overhang and mixed technical signals" from the silver price charts.
While the level of speculative bullish betting on gold futures and options also looks stretched on the latest data, O'Connell says, "silver's was much bigger than the previous week...[but] ETF activity may be signalling a positive shift" in Western investor sentiment towards the more industrial precious metal.
Chart of the SLV, PSLV and PHAG silver-backed ETF trust funds vs. the Dollar silver price. Source: BullionVault
Monday saw a small net inflow of funds into the giant iShares Silver Trust (NYSEArca: SLV).
But so far this month the SLV has shrunk by 2.2%, down to need 13,106 tonnes of backing, while the smaller Sprott closed-end fund (NYSEArca: SLV) has shrunk by 0.5% to hold 5,282 tonnes.
In contrast to those US-listed products, the WisdomTree silver ETF (LON: PHAG) – traded in London and cross-listed in Frankfurt, Paris, Milan and 11 other European bourses – has expanded by more than 2/3rds in March to date, swelling 68.2% to need 2,614 tonnes of bullion backing.
That growth offsets this month's combined outflows from the SLV and PSLV more than 3 times over. Compared to 6 months ago, the expansion in PHAG very nearly matches the liquidation seen since late September in the world's 2 largest silver-backed ETFs.
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"The lack of significant Western-related retail coin/bar and investor demand explains [the] relative lackluster silver performance," says Shiels at MKS Pamp.
"But we expect that to change," she adds, noting the recent heavy inflows into European-listed ETF investment products, "[going] into the series of central-bank rate cuts mid-year and the US elections."
Meantime in gold, the giant SPDR Gold Trust (NYSEArca: GLD) has so far this month grown the most since November, rallying 1.4% in size from its smallest since June 2019.
World No.2 gold ETF the iShares Trust (NYSEArca: IAU) has in contrast shrunk for the 9th month of the last 12, dropping 0.4% to its smallest since February 2020, eve of gold's Covid Crisis inflows and price jump.
European gold ETF products have also continued to shrink in March, with the 3 largest funds – the Invesco, iShares and Xetra funds – seeing another 2.7% liquidation as a group, while the WisdomTree gold ETF products have shrunk by 0.7% altogether.
Looking at the derivatives market, latest data from US regulators the CFTC say that 'Managed Money' speculators in Comex gold futures and options were 36% more bullish on Tuesday last week than their prior 5-year average.
In silver derivatives, that figure was 74%, flipping from a net bearish position only 3 weeks earlier.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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