While hard asset traders are trying to time the Federal Reserve rate hike, investors can still look to silver and related exchange traded funds in the meantime.
“The most attractive precious metal is silver,” Maxwell Gold, Director of Investment Strategy at ETF Securities, told ETF Trends in a call. “It has the best fundamentals.”
Gold argued that while gold bullion could suffer in a rising rate environment since the precious metal does not offer a yield and grows less attractive to other higher-yielding conservative debt assets, silver will enjoy industrial demand – abound 50% of silver demand comes out of industrial related industries like solar, electronics and automobiles. Due to its more cyclical nature, silver shows a 80% correlation to gold.
Silver may continue to enjoy greater demand as industrial production speeds up.
“A combination of higher inflation, a weakening US dollar (in first half of year) and improving manufacturing growth is likely to see silver prices trade higher to US$21/oz in 2017,” Nitesh Shah, Commodity Strategist at ETF Securities, said in a research note.