ETF Investors Miss Out on the Best Commodity Trade of the Year – by Luzi-Ann Javier (Bloomberg News – February 22, 2017)

Exchange-traded fund investors are missing the silver party. Instead of piling into the asset that’s offered the biggest gain among 22 raw materials on the Bloomberg Commodity Index this year, ETF investors are retreating. iShares Silver Trust, the biggest ETF backed by the metal, is poised for a fifth straight monthly outflow, a trend not seen since the fund listed in 2006.

Holdings in all silver-backed ETFs tracked by Bloomberg have shrank by 6.2 million ounces and are near the lowest in seven months.

Silver is surging amid demand for haven assets and bets that industrial use will rise at a time of tightening mine supply. While investors in commodity ETFs have shied away the metal in favor of gold, hedge funds are reaping the gains.

Money managers built their silver net-long positions every week this year, taking holdings to the highest since September. Buyers of mining-company ETFs including PureFunds have also benefited.

“We think this is a good year for silver,” said Mariann Montagne, a portfolio manager at Gradient Investment LLC, which added the metal to its endowment portfolio in January. “Constricted supply and increased demand — that’s having an impact” on prices, she said in a telephone interview.

Investors favor gold because it’s more heavily traded than silver, making it more liquid, she said.

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