Investors Lower Exposure to Gold, Silver Futures See More Demand

Data shows that silver futures positions are increasing rapidly, whereas gold futures positions are being reduced. This is not because the value of gold has disappointed investors
Demand for Physical

Financial markets around the world remain under a lot of pressure and volatility. Gold and silver are still trying to move up, yet it seems as if more investors flock tot he cheaper precious metal than ever before.

Silver Demand Keeps Increasing

Gold has always been the world’s leading precious metal, both in terms of value as well as prestige. Things are slowly coming to change in this particular regard, at least where investing in precious metals is concerned. CFTC data confirms that money managers are less eager to invest in gold, but their demand for silver is on the rise. 

More specifically, the data shows that silver futures positions are increasing rapidly, whereas gold futures positions are being reduced. This is not because the value of gold has disappointed investors and speculators, but it seems as if the market momentum favors silver. Higher gains for Comex contracts tied to July 2020 show that the silver-gold ratio may continue to dwindle for some time to come. 

The whole world shows signs of economic optimism now that COVID-19 seems to be under control. The big question is whether this outlook is warranted at this time. Fears over a second wave of the pandemic have not subsided by any means. 

For investors, this means that diversification of a portfolio becomes all the more important. It is possible that some investors pulled money out of gold and poured it into stocks. Others are staying within their “niche” and allocating more money to silver accordingly. 

One also has to keep in mind that silver has one core advantage over gold. It has industrial applications, and will likely benefit from improving economic events and opportunities. For gold, on the other hand, demand was already on the decline slightly prior to COVID-19. It seems plausible to assume that it will take ample time before this situation recovers.

Silver Price Momentum Visualized

Whereas investors are showing a clear appreciation for silver all of a sudden, the price chart tells a different tale. Following a push to $18 an ounce, the momentum was rejected in quick succession, and prices went as low as $17.32 per ounce again. 

Investors Lower Exposure to Gold, Silver Futures See More Demand 1

This momentum isn’t necessarily bearish, however. Following this dip, the silver price recovered swiftly, and is now on its way to attempt another push to $18. Whether this new effort will prove to be successful, is a different matter altogether. 

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