Writing in its latest Commodities ETP Weekly publication, the provider said: “Over the past week investors have turned more positive on the outlook for the global economy and for a peaceful resolution to the Ukrainian crisis, with more industrially-sensitive commodities like silver and nickel seeing strong inflows and gold seeing outflows.”
Over the week the group’s gold ETPs saw $52m in outflows, their largest since March. Silver ETPs on the other hand received $9m in inflows.
“Silver inventories have been trending down this year as industrial demand has picked up,” ETF Securities said, adding: “Due to its larger industrial demand base, silver tends to be more correlated with the business cycle. Supply and demand indicators are turning price positive in our view.”
According to Simona Gambarini, a research analyst at ETF Securities, the group remains positive on silver at current prices, saying that, in its view, $18 an ounce should be viewed roughly as a floor price for the metal.
Writing in recent note, Gambarini said: “History indicates the recent decline in silver price volatility to the lowest levels in over a decade (at the beginning of May), as measured by 30-day volatility, may be a precursor to a strong price move. In our view, downside risk is limited with industrial demand picking up and supply in decline.”
She added: “With the silver price less than half its 2011 peak and futures shorts already elevated, we believe the next strong trend price move is likely to be up.”
Following a price correction, the ETFS Nickel ETP saw $17mn of inflows in the past week.
Despite the recent correction, nickel remains the best performing industrial metal this year, the group said.
But, it added: “While we believe that nickel may have near-term upside on momentum buying, stretched positioning and elevated inventories could cap further price rises.”
The group is also positive on the prospects for platinum and palladium, despite these two commodities seeing outflows during the past week.
According to the ETF provider, platinum and palladium ETPs saw $14.1m of outflows last week as hopes rose that resumed talks between striking workers, platinum company management and South Africa’s government would result in an end to the strike that has crippled production in the world’s primary platinum producer for 19 weeks.
“Supply of both metals has become a lot tighter in recent months, impairing producers’ ability to meet their contractual obligations. We believe platinum and palladium could rally sharply should mining companies fail to meet all contractual obligations or announce active metal buying on the open market,” ETF Securities says.
