Silver ETF holdings soar as price rebound sparks retail interest

Thu Jul 25, 2013 1:23pm EDT

* Holdings in biggest silver ETF rise 1.4 pct Wednesday

* Retail interest up on steadier price, technical support

* Gold ETF holdings keep falling despite silver's gain

By Frank Tang

NEW YORK, July 25 (Reuters) - The world's largest silver-backed exchange-traded fund iShares Silver Trust posted its biggest one-day jump in holdings since January as a rebound in silver prices triggered resurgent buying from longer-term retail investors, analysts said on Thursday.

The tonnage of silver bullion bars held by the U.S. silver ETF increased 144 tonnes, or 1.4 percent, on Wednesday to 10,428 tonnes, a two-month high.

The move stands in sharp contrast to a month ago when the silver ETF's tonnage tumbled to a 2013 low of 9,882 tonnes, sparking fears that mom-and-pop investors were beginning to lose faith in the metal.

Silver has long been a favorite for smaller retail investors and speculators who want to gain exposure to gold at a fraction of the price. They also tend to buy and hold.

After falling toward technical support at $18 twice and holding there each time, the price of silver has gained 11 percent in the past 30 days. Year to date, the gray metal is still down 33 percent, underperforming gold which is down 21 percent.

"Silver investors had been concerned about another leg down. Since we've had a few weeks of relative price stability, there is more confidence for them in making the switch back into the ETFs," said Erica Rannestad, analyst at commodities research and consultant CPM Group.

However, there are no signs of abatement in the outflows of gold ETF holdings.

Gold ETFs have lost about a quarter of their holdings as funds and institutional investors - major shareholders in gold ETFs - dumped the traditional inflation hedge as the U.S. Federal Reserve laid out a plan to scale back its bond-buyback stimulus.

Despite a rebound in gold prices in the past 30 days, total tonnage of gold in ETFs continued to fall and remained at its lowest level since February 2011.

On Thursday, spot silver was up 0.2 percent at $20.18 an ounce, while gold gained 0.6 percent to $1,328 on the back of the U.S. dollar's weakness.

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