ETPs a Bright Spot in the Silver Space

Precious Metals

Silver ETP holdings keep rising despite the fact that the white metal continues to hit new lows.

Silver has performed poorly in September, and today was no exception. The white metal sank to a 14-month low of $18.2977 per ounce this morning, and the near future is not expected to bring much improvement.

Indeed, a median of 12 analyst estimates put together by Bloomberg suggests silver will average $20 in Q4 and just $20.40 in 2015.

Those numbers aren’t very promising, but there’s at least one bright spot in the market: exchange-traded products (ETPs). Silver ETP holdings are reportedly up 1.5 percent since mid-July, at 19.898.8 metric tons, according to more data from Bloomberg.

That may surprise some market watchers, but in fact silver ETP holdings have a history of rising when the metal’s price is down. Last year, holdings rose 2.4 percent even as precious metals prices took a nosedive.

Explaining why that’s the case, Bloomberg states that the draw of ETPs for retail investors, who are responsible for 80 percent of US ETP purchases, is the idea that long-term growth will spur improved industrial demand for silver “in everything from solar panels to electronics.” As Peter Jankovskis of OakBrook Investments told the news outlet, “[u]nlike gold, buyers of silver ETFs are not the momentum players. You will see people holding silver for a much longer period of time compared with gold. Last year, the ETF investors did not flee like you saw in gold ETFs.”

Spelling it out a little more directly GoldSeek’s Ronan Manly states, “[r]etail investors tend to have a longer term investment horizon and these silver ETF investors are mostly long term buy and hold investors. Recent updates on the flows into these ETFs and their total holdings point to continued accumulation across-the-board by these retail investors. It appears that the current price weakness in the silver price has if anything, encouraged these retail investors to accumulate additional holdings.”

The upshot is thus that while ETP interest clearly isn’t doing anything to spur silver prices upward, it does seem to indicate that some still believe in the white metal’s prospects — certainly encouraging for those interested in the space.

Company news

Arian Silver (TSXV:AGQ,LSE:AGQ) said on Tuesday that it continues to make “excellent progress” on refurbishing and reassembling the processing plant at the site of its San Jose project. The company’s financing negotiations also continue to move forward.

Jim Williams, CEO of Arian, commented, “[t]his Plant, together with its extensive inventory of spare parts is now on site pending the completion of its reassembly and commissioning, which is also on-track for the end of the year in readiness for commercial production.”

Today, Santacruz Silver Mining (TSXV:SCZannounced that it has entered into a US$28.4-million prepaid silver purchase agreement with JMET. Under the agreement, the company will sell 4,635,000 ounces of silver through to August 2019, “subject to certain adjustments relating to metal prices.”

The deal is aimed at funding Santacruz’s future work, such as the development of its Mexico-based San Felipe project.

Junior company news

Also today, Kootenay Silver (TSXV:KTN) released the results from the first five HQ diameter drill holes from Phase I drilling at its La Negra diatreme breccia prospect. La Negra is located about 6.5 kilometers north of the company’s Mexico-based Promontorio silver resource.

Encouragingly, visual inspection of drill core shows that all the holes “have encountered wide intervals of altered breccia, which is the same host rock as is seen across the mineralized surface.”

Finally, Puma Exploration (TSXV:PUM) reported this morning that stripping and trench sampling operations on geophysical targets at its Nicholas-Denys project in New Brunswick have resulted in the discovery of new silver-gold showings. They “indicate a northerly extension of the NW-SE trending Cullinan zone located between the Main Fault and the Rocky Brook Millstream fault.”

At this point, the Cullinan zone has been confirmed to be at least 600 meters long.


Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

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