Speculators lift silver longs, ETF stocks, but outlook remains cloudy

CHICAGO (Aug 26)  Demand from speculative investors has lifted long positions in COMEX silver futures to a five-month high, and boosted to record levels the amount of silver held by major exchange-traded funds.

Long positions held by non-commercial traders -- which include speculative investment funds -- rose by 363 contracts in the week ending August 20 to 37,308 contracts, according to the latest Commitments of Traders report from the US Commodity Futures Trading Commission.

Perhaps more importantly, non-commercial traders slashed their short positions by 5,436 contracts to bring total shorts to 18,800 contracts.

Meanwhile, silver held by the world's largest silver ETF -- the iShares Silver Trust from US fund provider BlackRock -- has risen to 10,555.70 mt, the highest amount since early April.

According to analysts with UK commodity fund provider ETF Securities, the amount held by silver ETFs now accounts for about 83% of 2012 silver mine production.

But the speculator-driven rally lacks fundamental support for a sustained gain, analysts with UK banking giant Barclays said Friday in a report. Industrial demand remains mixed, precious metals analyst Suki Cooper said.

The latest semi-conductor data implies continued improvement globally, with growth in shipments for a second month but at a modest 2% year on year, Cooper said. Japan was the only region to suffer a decline in June following a year of demand increases following its March 2011 earthquake and tsunami.

The decline in semi-conductor demand across Europe has shown signs of bottoming out, rising 1% year on year in June after remaining flat over the past two months, Cooper added.

And while powered silver imports to China rose by 37% in July from a year ago, imports for unwrought, semi-manufactured and jewelry fell, she said, pointing to the recent trade data released last week.

Imports for all other silver products fell 22% in July from a year ago, taking year-to-date shipment down 7% from the same year-ago period, Cooper said in a separate report analyzing China's trade data.

COMEX silver for December delivery, the most actively traded month, closed $0.274/oz higher Monday at $24.055/oz.