This year all the components of the Metals Group show a positive performance. That is all but one. In particular, in metals group, we can see how Iron Ore (ITI) climbs 69.22%, Palladium (PA) 28.55%, Gold (GC) 9.90%, and Copper gains 1.97%. However, until now the Silver (SI) registered a decrease of -2.06%. In this post, we review what happened with this precious metal.
Incorporation of new players
The Commitment of Traders (COT) report is released every week by the Commodity Futures Trading Commission (CFTC). The COT is known as a market sentiment indicator because it shows the positioning in the futures market. In the following chart, it’s worth noting that, in 2017, silver volume exceeded 100,000 of net contracts; that is the highest volume in history. This increase shows us the expansion level, in particular, in the long positions traded by non-commercial traders.
The increase coincides with two announcements made by the London Mercantile Exchange (LME). In August 2016, LME announced that in the first half of 2017 would launch the spot and futures contracts for Gold and Silver. After this, in October 2017, LME made changes to incorporate compensation members to expand volume on the Precious Metals area of LME. The LME’s Chief Executive Matthew Chamberlain told Reuters that the goal is to develop trading around Gold and Silver. He also added that LME seeks to expand market creation activities, particularly in the Asian market.
A positive year for silver producers
SLVF, the main ETF that groups together Silver producers, this year have reported an advance of 13.44%. GDX, on the other side, which is the ETF that groups together Gold producers have climbed 22.63%.
Now, if we look at the correlation between SI and SLVP, we can observe the positive relationship between both. We conclude that the silver price (SI) is lagged compared to the rally developed by gold (GC), and in consequence, the SI price should start to see new highs.