Saudi Central Bank buys $40 million in SLV and silver miners, but it's not what you think

NEW YORK (August 25) Silver prices remain trapped below $39 an ounce; however, some analysts say they expect it is only a matter of time before prices break above $40 and push to record highs as the precious metal continues to attract significant attention.

Late last week, some traders and analysts jumped on the news that the Saudi Central Bank had entered the precious metals market. 13F filings with the Securities and Exchange Commission show the central bank bought 932,000 shares in the second quarter, valued at $30.578 million. The central bank also purchased 203,700 shares of the Global X Silver Miners ETF (NYSE: SIL), valued at $9.8 million.

While this is still a bullish sign for silver and highlights growing investment demand, some comments on social media have exaggerated the investment, speculating it is a move to remonetize the precious metal.

However, the Saudi Central Bank also manages the nation’s sovereign wealth fund, and according to some analysts, it is more likely the investment was made through that fund. According to the SEC archives, the 13F document was filed by MaameYaa Kwafo-Akoto, Partner at A&O Shearman LLP, which advises sovereign wealth funds, central banks, family offices, insurance companies, pension funds, and development finance institutions around the world on their investment arrangements.

Saudi’s investment in SLV is actually one of the fund’s smallest ETF holdings in the second-quarter filing. The fund’s position in SLV is less than one-sixth the size of its position in the Energy Select Sector SPDR Fund (NYSE: XLE), which is valued at $183.2 million, and about one-fifth the size of its allocation to the SPDR S&P 500 ETF Trust (NYSE: SPY), valued at $130.1 million.

Some analysts have noted that if a central bank wanted to remonetize silver, it would buy the physical metal and not a paper derivative.

Currently, only Russia has advertised that it is an active buyer in the silvermarket. Last year, the Russian government said it was considering spending 51 billion rubles ($535.5 million) over the next three years to replenish its precious metals reserves, including silver and platinum-group metals.

In a panel discussion at the 2024 LBMA Precious Metals Conference, representatives from the Central Bank of Mongolia, the Czech National Bank, and Banco de México briefly discussed silver Mongolia’s and the Czech central banks said that silver is too volatile to hold as a monetary metal.

Meanwhile, Mexico’s central bank holds some silver, as mining is an important part of the nation’s economy. Mexico is the world’s top silver producer.

KitcoNews