With traders examining commodities ideas for 2018, the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are receiving some renewed attention. That focus comes amid recent struggles for the white metal, but there are some data points traders should consider before wagering on silver and the related exchange traded funds.
SLV and SIVR, which are backed by physical silver bullion, have traded slightly lower since the start of the fourth quarter and year-to-date performances for the silver ETFs are well behind competing gold funds.
“Whatever the motive, the latest Commitment of Traders (CoT) data shows large speculators reduced their net long exposure on silver by nearly 28,000 contracts in the week ended Dec. 5 — the biggest one-week decline ever recorded, per Schaeffer’s Quantitative Analyst Chris Prybal,” according to Schaeffer’s Investment Research.
Silver could get another boost if gold prices start rebounding in earnest. Indian demand is vital for gold because the country is the second-largest buyer of the yellow metal behind China. India, one of the world’s largest gold consumers, could be set to lower its import tax on bullion, which could be major catalyst for gold prices.
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Still, traders should consider the aforementioned CoT data. Fortunately, there could be more good news than meets the eye in that report.
“Regarding CoT positions on silver, there have been just seven weekly declines of more than 20,000 contracts ever, according to Prybal. The last signal of this kind happened in May 2017, and prior to that you’d have to go back to June 2015, which marked the first signal in nearly a decade,” notes Schaeffer’s. “Historically, these CoT signals have been bullish for silver futures. The malleable metal has averaged much bigger-than-usual gains across the board after a mass exodus of large speculators, with a win rate that doesn’t dip below 67% at any marker up to six months out.”
Since the start of the current quarter, investors have pulled $39.4 million from SLV while adding $3.36 million to SIVR.
For more information on the silver market, visit our silver category.