Chicago -- (Kitco News) --Speculators piled into silver, helping to lift prices to near $20 an ounce early last week, while gold also saw investors return to the fold, according to U.S. government data.          

In the weekly commitment of traders report data from the U.S. Commodity Futures Trading commission, the managed-money sector aggressively added to long positions in the disaggregated and legacy reports. For the week ended Aug. 31 they added 11,873 gross contracts to be net-long 39,499 contracts. In the legacy report, the non-commercials increased their gross long holdings by 11,990 and are now net-long 44,633 positions. Swaps dealers modestly added to shorts and producers cut longs and added shorts.          

The reporting period stretched from Aug. 25 to Aug. 31. Significantly, December Comex futures on the New York Mercantile Exchange closed at $19.072 an ounce on Aug. 25, the first time the most-active contract settled over $19 since late June. By doing so it could have enticed trend-following funds to snap up silver. In all, Comex silver prices gained 36 cents, closing at $19.432 on Aug. 31. Prices continued to rally last week, with the white metal closing at $19.949 on Friday. Given the steady price rise, more buying by speculators is likely to show up in next week’s CFTC report.          

Barclays Capital said in a research note that “speculative interest in silver has grown to levels not seen since December last year, with open interest on Comex at a similar level to December and non-commercial positions making up a third of total open interest. Prices themselves were trading only marginally higher during the week-ended 31st August (week covered by CFTC data) than where they were during the week-ended 1st December (previous non-commercial positions high),” the bank said Tuesday. They also noted that record-high holdings in silver exchange-traded funds were hit during both time frames, too.
Fundamentally, the bank said investor interest is key to price momentum for the white metal as supplies are expected to be in surplus this year.          

Gold also saw its share of investment buying during that time. Managed-money accounts added a gross 14,058 long positions to stand now net-long 216,265 contracts. In the legacy reports they are now net-long 260,913, after adding a gross 17,161 contracts. Swaps dealers and producers both cut longs and added to short positions.          

The rise in long positions comes as speculators returned to gold as a safe-haven investment. During the time frame, prices rose $16.90 an ounce, settling Tuesday at $1,250.30. It ended Friday not far from there, at $1251.10.          

As investors continue to hold gold longs, they are building up positions to bring them back to the sizable tally they had in June. When using the disaggregated report, the biggest net-long position then had then reached 227,831 contracts during the week ended June 22. In the legacy report, the biggest net-long position was 274,202 contracts.          

Activity in the platinum group metals was subdued, according to CFTC data. Managed-money accounts added to long positions palladium, but not to a great extent. They are net-long 10,950 positions. They slightly cut longs and added to shorts in platinum and now stand net-long 14,081 contracts.          

In copper, speculators are now net long 19,483 contracts in the disaggregated reports, having added a gross 3,012 long positions. For further details of the CFTC data, please go to www.cftc.gov.

By Debbie Carlson, of Kitco News;dcarlson@kitco.com.

Editor’s Note: Meet the Kitco News Team at the upcoming Kitco Metals eConference September 12-13, 2010. A not-to-be missed event featuring Ron Paul, Marc Faber and other industry heavyweights. The eConference is free with Pre- Registration www.kitcoeconf.com.

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