Silver Posts Longest Slump in Two Months as ETP Assets Decline

  • Holdings in exchange-traded products drop to lowest since 2013
  • `Hard for silver and gold to rally' with rate prospects: RJO

Silver prices had the longest slump in two months and investors sold the most since June from funds backed by the metal on speculation that the Federal Reserve will raise interest rates this year.

Holdings in silver exchange-traded products dropped 93.1 metric tons to 18,887 tons as of Monday, the lowest since July 2013, data compiled by Bloomberg show. Prices have dropped almost 7 percent since touching a four-month high last week after Fed officials signaled that they’re still considering tighter monetary policy this year.

Higher rates cut the appeal of precious metals, which don’t pay interest or give returns like other asses such as bonds or equities. Traders see a 52 percent probability that the U.S. central bank will increase rates this year, up from 33 percent a month ago, Fed-fund futures data show.

“The silver market is under pressure, along with gold, due to the new language introduced by the Fed last week,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, wrote in an e-mail. “With the threat of a rate increase in the coming weeks, it will be pretty hard for silver and gold to rally.”

Silver for immediate delivery fell 1 percent to $15.2645 an ounce at 2:07 p.m. in New York. The metal is headed for a fourth straight decline, the longest slump since Aug. 26. Silver futures for delivery in December declined 1.1 percent to settle at $15.239 an ounce on the Comex.

BullionVault’s gauge of client buying fell below 50 in October, indicating more sellers than buyers, the company said in a report Tuesday. The index is at the lowest since data began in 2012. BullionVault’s gold gauge dropped to a nine-month low.

“Silver is more volatile than gold and so more at risk if the Fed raises rates,” Adrian Ash, head of research at BullionVault, an online trading service, said by phone from London. “There are some very stale longs in the silver market looking for a way out.”

Spot gold fell 1.6 percent to $1,115.48 an ounce, the fifth straight drop and the longest slump in a month, according to Bloomberg generic pricing. Gold futures for December delivery lost 1.9 percent to $1,114.10 on the Comex.

Platinum and palladium futures also declined on the New York Mercantile Exchange.

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