Boost Bets

The volatility in silver hasn’t deterred hedge funds. Money managers and other speculators on Jan. 27 were the most bullish since July, the most recent government data show. Bets on higher prices more than doubled from the end of December to 40,164 futures and options contracts.

With increased demand for a hedge against a global slowdown, some investors are buying silver because its 48 percent drop over the last two years made it a cheaper alternative. An ounce of gold fetched $1,272.45 on Thursday, or enough to buy about 72.9 ounces of silver at $17.4632. In the past decade, the average ratio was 58 ounces.

“The volatility in silver does not really impact because investing in silver is a strategic decision as opposed to a tactical one,” Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors Inc., which oversees $900 million, said in a phone interview on Jan. 27.

Ample Supply

While the appeal of silver as a haven has given a boost to prices, supplies are ample, according to Suki Cooper, an analyst in New York at Barclays Plc. Demand will continue to trail supplies for 10 straight years, CPM Group said.

“Since much of it is produced as a byproduct, there is very little production discipline, and hence its very difficult to forecast strong prices,” John Stephenson, chief executive officer of Stephenson & Co. Capital Management in Toronto, said in a telephone interview on Jan. 30. The company manages about C$50 million ($40 million). “If you are looking for a quick trade, silver could be a smart way, but if you are looking for buy and hold, and looking to invest your retirement money, stay away.”
 

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