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Will Silver benefit from 2015 Commodity Index rebalancing?

Silver stands to benefit from the annual reweighting of the major commodity indexes, said TD Securities. Both the S&P GSCI and Bloomberg Commodity Index have released their annual targets. 
 
“While gold is unlikely to see any outsized moves due to the normal roll requirements in January, silverhowever may see some larger-than-normal buying behavior during the roll, due to the need to add to the March contract — that the indices roll into in November– mainly in order to bring the current BCOM index weight of 3.6% to the target of 4.3%,” TDS added. 
 
“The expectation is for additional buying of silver over the five-day roll period, and with the trading biases surrounding the impact of the rebalancing, this suggests that prices may again see a temporary but minor boost …. However, we would note that even with a large estimated 2014 rebalancing addition of 6.3% additional longs — as a percent of open interest — it correlated with a less than 2% price increase over the 5-day period,” they noted. 
 

Of course, there will be other factors at play besides the rebalancing. TDS says the rebalancing also points toward additional buying in Brent crude oil.

Source: Scrap Register

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