I have an '89 USA strat I traded for. It has genuine Fender Noiseless pickups and 500k pots that were added at some point in it's history. The guitar looks new and plays like a dream and is dead quiet when playing.

However, I noticed that there is a hum/buzz when the 5-way switch is in the 1/3/5 positions. But it's not like normal single coils because as soon as I put a finger on any string the noise instantly stops. It's a relatively minor issue because when I'm not playing I turn the volume on the guitar to zero anyway. The noise might also be there in the 2/4 positions but it's barely noticeable.

I think I've seen this issue with normal humbuckers in other guitars. Is this a grounding problem? How can I fix this?

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In my opinion Leo Fender had essentially perfected the guitar amplifier by 1964.

Sounds like a grounding problem to me.

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In Reference to Blues Legend RL Burnside:
After a heart attack in 2001, Burnside's doctor advised him to stop drinking; Burnside did, but he reported that change left him unable to play.

In my experience, what you've got isn't a grounding problem, but a screening problem. Fender use un-screened hook-up wire inside their guitars: very vintage, but electronically not good practice. And to make things worse, they only screen the internal body cavities on some models, definitely not all. The back of your guitar's pick guard may be screened, but that's not really enough.

When you have the guitar in front of you (but don't touch the metal bits) your body's acting like a big aerial, picking up radio interference, mains hum and all sort of stuff and this is picked up by the unscreened wiring in your guitar (not the pickups). When you touch the strings or bridge your body is earthed and the hum stops.

The only real cure for this problem is to screen the body cavity, either with conductive paint or copper foil. Just make sure that the screening is ultimately connected to an earth point in the guitar (usually one of the pot bodies). Plenty of websites out there will give you loads of information on the various ways to screen the body.

My USA Deluxe Tele has a screened body and Vintage Noiseless pickups and is quiet as a church mouse. I fitted my MIM Strat with VNs but it was still noisy until I screened the body. Surprisingly my CS Custom Deluxe Strat wasn't screened either (it is now!). My most recent Fender acquisition - a Jaguar Blacktop HH - still needs doing, as it's noisy even though it has twin humbuckers.

Hope that helps, anyway.

@ stiggie, Thanks for the comments and advice. I'll look into the screening.

Regards,

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In my opinion Leo Fender had essentially perfected the guitar amplifier by 1964.

I'd go for the conductive (anti EMR) paint. I find it more effective and easier to use than making a copper "patchwork quilt" in the cavity! Just don't let it get on clothing, carpets or what ever, it won't come off, anti EMR paint is basically carbon in suspension.

Run self adhesive copper strips to all the extremities of the cavity with a spot of solder at any joins, crossovers etc. Connect a ground wire to the copper (either screw with ring connector or solder) then give the cavity a couple of coats of the paint. Connect the free end of the ground wire to a suitable point on one of the pot bodies.

What he said!