Commodity Online
It has been investment that has been driving silver in 2009, and so, once again, silver's behaviour has been more like that of gold. How do these flows compare?

According to The Silver Book, an investment research from V M Group, supporting both gold and silver has been great demand from the exchange-traded funds (ETFs) and the futures market at Comex in New York.

There are three silver ETFs: the market-leading Barclays Global Investors (BGI), which is based in New York; and two in Europe, ETF Securities in London and ZKB in Zurich. By late April these had 8,413t, 534t and 1,422t respectively, totalling 10,394t. This is 2,140t more than at the end of 2008, a year when 2,325t were added in total.

How do these flows compare to those into gold ETFs? In late April 2009 the 15 gold ETFs held 1,643t, up 454t in the year, much more than the 321t taken in the whole of 2008. Total holdings of silver ETFs are thus 6.3 times that of gold, while inflows this year so far have been a smaller 4.7 times the size of gold's.

Drilling down further, whereas in January they were 8.1 times gold, in February they were just 3.2 times and in March just 1.7. However April saw inflows into silver, but a net outflow for gold.

On Comex, the large speculators' net long position, the traditional measure of speculation, has fallen from 3,078t at the end of 2008 to 2,177t by 21st April. For gold, the equivalent positions are 392t to 399t. Thus the non-commercial net long position in silver is now 5.5 times that of gold, having begun the year 7.9 times larger. In other words again this has been in gold's favour.

Taking the ETFs and Comex together, silver inflows have been 1,237t, while for gold they have been 461t, a ratio of 2.7:1 silver:gold. This is much more in gold's favour than was the case before 2009.

That is also the case if one compares it to other measures of market size, such as mine supply, where silver volumes are about nine times bigger than gold's.

It could therefore be argued that the market impact of investment flows in 2009 has been more marked on gold than silver, although this has to be nuanced by noting that gold has larger above-ground liquidity, and so is better able to cope with such flows.

Gold is, of course, much more valuable than silver, currently about 70 times. Thus when we talk of the silver market being six or nine times larger in volume, in value terms it is only 1/8th to 1/10th the size of gold's. So the flows into ETFs and Comex this year of 461t for gold and 1,237t for silver have been in terms of dollars about $13bn for gold, and around $0.5bn for silver.

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