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(Bloomberg) — Precious metals are once again enticing investors.
After ignoring the assets for most of the year, investors added $393 million to U.S. exchange-traded funds backed by precious metals this month through Oct. 20, on course for the biggest monthly inflow since February. Gold and silver are gaining favor amid increasing expectations that the Federal Reserve could wait until next year to raise interest rates. Higher rates curb the appeal of precious metals because they don’t offer interest or yields.

Gold has rallied more than 8 percent from a five-year low in July and silver climbed after the Fed kept interest rates unchanged in its September meeting, citing global risks that threaten curb domestic growth and depress inflation. While officials from Chair Janet Yellen to Vice Chairman Stanley Fischer said a rate increase may be warranted this year, traders in Fed-fund futures aren’t convinced, and they’re pricing in the probability of the liftoff at 34 percent by December.

“The momentum can stay strong and the ETFs can stay bid” for the rest of the year, said George Zivic, a New York-based portfolio manager at

OppenheimerFunds Inc., which oversees $220 billion. Prices for precious metals can continue to climb another 5 percent to 8 percent higher, he said.
Retail investors are returning to precious metals after a rout that had wiped more than $90 billion from gold and silver ETFs since 2012. There are more signs that bulls are reemerging. Dealers aren’t finding enough silver coins to meet demand, as mints from Australia to the U.K. ration supply. Russia and China continue to boost gold holdings, while Elliott Management’s Paul Singer said the yellow metal should represent as much as 10 percent of investors’ portfolio.

Bears are also on the retreat. Wagers on gold’s decline slumped for four straight weeks to the smallest since March 3, while short positions on silver shrank by more than half this month, data from the U.S. Commodity Futures Trading Commission show.

To contact the reporter on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Millie Munshi, Joe Richter