Hedge funds are betting on cheaper silver for the first time since at least 2006, splitting from investors accumulating close to the biggest hoard ever and the analyst consensus for prices to rebound from a bear market.

Speculators were the most bullish in two years as recently as October and now have a net-short position of 560 futures and options, U.S. Commodity Futures Trading Commission data show. Holdings in exchange-traded products, valued at $14.5 billion, are within 1.3 percent of the all-time high reached mid-March, according to data compiled by Bloomberg. Silver, which entered a bear market on April 2 and plunged as much as 13 percent yesterday, will average $31.25 an ounce in the fourth quarter, or 32 percent more than now, based on the median of 14 analyst estimates compiled by Bloomberg.

With 53 percent of supply going into products from solar panels to batteries, faster economic growth should be boosting prices. Instead manufacturers are relying on metal accumulated after four years of surplus mine output that drove Comex-tracked inventories to a 15-year high. China, the second-biggest buyer, has stockpiles for 18 months of industrial use, from four months in 2009, Standard Bank Plc estimates. The quickening growth is also curbing demand for precious metals as a store of value.

“Silver is going to catch a few panic bids but that will be limited since people are realizing that the world is not coming to an end,” said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital Corp. “Some analysts believe in the growth story and money being pumped will boost growth. There is still a slack in demand compared to the supply situation.”

Price Drop

The metal dropped 22 percent to $23.7125 in London this year, compared with an 17 percent decline in gold and falling more than platinum and palladium, mostly used in catalytic converters for cars. Silver reached a 2 1/2-year low yesterday and is the worst performer in the Standard & Poor’s GSCI gauge of 24 commodities, which retreated 6.2 percent. Gold plunged as much as 9.9 percent yesterday. The MSCI All-Country World Index of equities rose 5.8 percent and a Bank of America Corp. index shows Treasuries gained 0.7 percent.

Hedge funds’ net-short position in the week ended April 9 narrowed from 2,982 on April 2, when prices entered a bear market, and compares with a bullish bet of 38,618 by Oct. 9, CFTC data show. They turned negative as prices slipped 33 percent from a seven-month high set Oct. 1. One futures contract is valued at $117,875. Two of the three most widely held options on Comex confer the right to sell metal at $20 before the end of November, or 16 percent less than now, according to bourse data.

‘Leveraged Bet’

The link to gold strengthened in the past eight months as silver’s ties to platinum weakened, a sign that investors aren’t trading the commodity as an industrial metal. Gold yesterday tumbled to the lowest price since February 2011. The 30-week correlation coefficient with gold reached 0.95 last month, the highest in at least three decades. A figure of 1 means the two move together. The correlation with platinum dropped to 0.66, from 0.89 a year earlier, data compiled by Bloomberg show.

“Silver is the leveraged bet on gold really,” said Charles Morris, who oversees about $2.5 billion of assets at HSBC Global Asset Management in London. “If what’s happening in the market is not good for gold, then it’s not good for silver either. The market is precarious.”