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ETF Securities Looks For Silver To Play Catch-Up

By Daniela Cambone of Kitco News
Thursday April 17, 2014 1:25 PM

(Kitco News) -  (New York) – Silver’s struggle to hold gains could be a bad indication for the gold market as the white metal fails to keep pace, said the director of research for ETF Securities.

Michael McGlone

"I have been waiting for silver to catch up to the party and am worried if it doesn’t, it’s a risk to the party." Michael McGlone, ETF Securities


“The key thing I am watching now is silver, all precious metals have positive correlations to each other, they are not very high - but the highest is silver and gold,” said Michael McGlone, director of research for ETF Securities in an interview with Kitco News. 

“It is very rare for one to zig and the other to zag,” he explained.

With gold prices rising 9% this year, silver has been stuck at the $20 dollar level for the past three to four weeks, its 20 -day volatility has dropped to the lowest level since its big plunge last year, he said.

“My fear is if silver goes down it will be a bad indication for gold,” McGlone said.

“I have been waiting for silver to catch up to the party and am worried if it doesn’t, it’s a risk to the party,” McGlone said.

Silver prices have traded sideways and choppy for three weeks; as of 12:56 p.m. EDT, spot silver was at $19.5720 an ounce.

ETF Securities recently reported that more money flowed into silver exchange-traded products than any other commodity during the first quarter, enabling commodity ETPs as a whole to post their first net inflow since the fourth quarter of 2012.

“There has been a decline in gold ETF holdings but there has still been an accumulation in silver, platinum and palladium,” McGlone said.

As for gold, McGlone says he believes it bottomed at $1200 and senses there is still substantial demand.

“I saw a little bit of backwardation earlier in the week and the forward  rates are all negative – these are signs of substantial demand that indicate prices could go higher,” said McGlone.

McGlone said many anticipated gold would go down with the U.S. Fed taper program nearing an end, but it has been the opposite. 

“At the end of last year the  global consensus at all these wealth manager conferences I attended was; the dollar will be stronger, interest rates are going to go up, stocks will continue to do well and by the way, gold should continue to go down,” McGlone said.

“We are basically in the second week of Q2, and it has been the opposite.  At some point this fade to consensus trend has become the trend. Meaning gold is improving,” he added.

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Despite the Fed tapering, U.S bond yields remain under pressure and that is a big indication something is happening that the market didn’t even expect, McGlone explained. 

“Ten year notes started the year at 3%; right now they are at 2.65% – you would expect that if the Fed lightened up on their buying, bond yields would go up – that hasn’t happened.”

McGlone said he is “absolutely” bullish long-term on gold, citing that the best thing that happened to the metal, was 2013 ending.

By Daniela Cambone of Kitco News dcambone@kitco.com
Follow Daniela Cambone on Twitter @DanielaCambone



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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