Waiting on Catalysts for Silver ETFs

The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are still sporting solid year-to-date gains, but March has been unkind to silver and the related exchange traded funds, leaving some commodities market observers to ponder when the white metal will rebound in earnest.

Looking ahead, the quickly expanding photovoltaic panel or solar industry could continue to drive silver demand. Installations and investment in solar panels, which incorporate silver for its electrical conductivity, are at record levels, reports Henry Sanderson for the Financial Times.

Bolstering the appeal for silver, the precious metal enjoys heavy industrial demand that benefits from an expanding global economy. Over 50% of global demand for silver comes from industries like chemicals, medicine and technological appliances.

If professional investors start moving away from equities, precious metals, including silver, could benefit.

“So, when the Dow Jones Index and the broader stock markets finally crack, we are going to finally see hedge funds and institutional investors rotate out of the majority of highly inflated stocks and into the precious metals and mining sector. This will have a profound impact on the price of gold and silver as well as their mining companies’ share prices,” according to a Seeking Alpha analysis on silver prices.

Inflows to silver ETFs have been mixed to start the year, indicating that some investors may be concerned about the impact of the Federal Reserve raising interest rates on silver and other commodities.

Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction. The Federal Reserve is targeting three interest rate hikes this year, which could white on precious metals, but some market observers believe there is upside to be had with the white metal. The Fed meets this week with some bond market participants believing a rate hike is almost a sure thing.

“In the future when demand for physical silver overwhelms supply, investors will move into the next best thing… the primary silver mining shares. Because there are so few primary silver miners, any significant amount of funds moving into this sector could reach insane levels never imagined today,” according to Seeking Alpha.

For more information on the silver market, visit our silver category.

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