Price Rally for Silver, Gold Plateaus as Hedge Fund Buying Reduces

Silver and gold’s rally may be slowly dying down as buying from hedge funds declines. Last week, prices for both silver and gold hit $26 per ounce and $2,075 per ounce respectively. Despite an increase in selling pressure, some analysts expect that both precious metals will remain in bullish rallies in the long-term as investors try to safeguard themselves against worldwide economic uncertainty and rising inflation.

The Fed may be considering ending its ongoing hiking cycle after one final rate hike in May. Concurrently, industrial use demand is projected to remain strong through this year because of the green-energy shift being adopted globally that is driving solar power demand.

Abrdn’s ETF Investment strategy director Robert Minter stated that metal investors needed to be watching silver as the metal had a lot of potential and was greatly undervalued. Thus far, silver has outperformed gold even as the ratio of gold to silver fell to the lowest level from the start of this year. The latest report from the Commitments of Traders shows that money managers stepped up their speculative total long positions in the Comex silver futures to 42763 contracts. Simultaneously, short positions increased to hit 24973 contracts.

Based on long-term trends, however, bullish speculative positions have dropped by about 60% from the levels last seen in March 2022. Analysts point out that silver’s speculative positioning is slightly higher in comparison to gold, a metal that has seen hedge funds rake in profits after its month-long bull run.

The Commitments of Traders report also highlighted that total long positions in the gold futures at Comex dropped to just 135,015 contracts. Concurrently, short positions dropped to 30,409 contracts. Overall, this precious metal’s market has stayed net long with 104,606 contracts, a 5% drop from last week.

TD Securities analysts posit that the price of gold may have reached its near-term high. In a statement, the analysts noted that commodity trading advisor positioning may have also topped max long.  Some analysts note that it’s not surprising that gold is profit taking. Ole Hansen, who heads commodity strategy at Saxo Bank, argues that the precious metal registered its strongest four-week purchasing spree since 2018.

Hansen noted that despite this, however, it was still less by 38,000 contracts from its 2022 record, which surpassed $2,070 per ounce. Swissquote Bank’s senior analyst Ipek Ozkardeskaya added that investor demand for the precious metal would continue to be determined by the U.S. dollar’s trend. Ozkardeskaya explained that further weakness of the dollar could push the price of one ounce of gold to a new high in the coming weeks.

Extraction companies such as Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are likely to keep an eye on future market movements as they tweak their long-term plans in light of the evolving market dynamics.

NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF

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