The iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) are each of just under 1% to start 2016, but investors waiting on a big move in either direction for silver prices should exercise some patience because the white metal appears mired in a tight trading range.
Silver and the aforementioned exchange traded funds struggled in unison with other commodities last year as the U.S. dollar strengthened. SLV and SIVR both finished the year with double-digit losses that exceeded those of comparable gold ETFs.
Investors have previously turned to silver exchange traded funds as an asset with a safe store of value and as a metal with wide industrial application in a growing economy. However, the precious metal is now suffering from a bad turn on both fronts. That means heading into 2016 silver ETF investors face a confounding set of circumstances.
Additionally, unlike gold, silver is used in many industrial applications, but industrial demand is diminishing as global growth, notably China, begins to slow. Industrial demand for silver dipped 0.5% last year on lower demand from Europe and North America.
Silver prices are trapped in their familiar $13.61 to $14.40 range, and there is little reason to trade unless specifically targeting this range,” according to DailyFx.com. “With this in mind, we reiterate yesterday’s outlook that range traders would use a rally to $14.25 to book profits on long positions bought near the $13.75 support level. Some range traders may even short near $14.25 with stops above $14.40. Caution is however warranted, as currently the price of gold suggests that silver should be trading at $14.60. In other words, silver may break its range. This estimation is based on a regression analysis using the last 6 months of trading data.”