Silver prices are up little over 14.50% year-to-date. The gray precious metal is hands down one of the best-performing assets so far in 2017. Could the silver prices continue to go higher in 2017 and beyond? It’s possible.
The year 2016 was critical. Silver prices increased during that year for the first time since 2012.
When an asset starts to perform well, despite overall negative sentiment, it tends to show up on institutional investors’ radar. The reason behind this is very simple; investors look at it and ask if there’s emergence of a new trend.
When looking at institutional investors, their actions suggest they are asking if silver prices could soar, and they are buying.
There’s one powerful report that tells us about their actions called the Commitments of Traders (COT) report released by the U.S. Commodity Futures Trading Commission (CFTC).
In the most recent COT report, under managed money, which essentially means hedge funds and other similar institutions, it seemed that there was a rush toward silver.
For the week ending February 14, 2017, speculative institutions added 6,041 long silver contracts from the previous week. The total long contracts reached 84,040. (Source: “Commitments of Traders,” U.S. Commodity Futures Trading Commission).
As long contracts increased, short positions on silver declined by 464 contracts to 11,874. This says that institutional investors are net long on silver with 72,166 contracts.
Keep in mind, each contract is 5,000 ounces of silver. So, in essence, they are willing to buy over 360 million ounces of silver.
Looking from a long-term perspective since the beginning of this year, managed money’s long exposure to silver prices has increased by over 36%. There were 61,676 contracts on January 3, 2017. (Source: “Disaggregated Futures Only Reports: 2017,” U.S. Commodity Futures Trading Commission.)
It will be interesting to watch how the institutional investors react to silver prices. Understand that they have a lot of money, and they could really make an impact on where silver prices go next.
Source: Lombardi Letter