Silver exchange traded funds (ETFs) were set to absorb further losses Thursday as the dollar continued to strengthen. The largest ETF for silver was down 7% in premarket.
Yet after the recent massive sell-off in physical silver, some believe that silver ETFs are now relatively cheap investments, especially considering that the fundamentals for silver are still in play.
The iShares Silver Trust (NYSEArca: SLV) was down 10% over the past week heading into Thursday’s session. It lost more than 8% in Wednesday’s sell-off.
Market analyst Peter Krauth, metals and mining expert, believes that the recent fall in silver prices was due to vulnerable downward pressure after a quick surge in prices, higher margin requirements and hefty sell orders from large investors.
Nevertheless, silver assets are still viable investment options, some say. For instance, Eric Sprott of Sprott Asset Management LP liquidated $35 million from his own Sprott Physical Silver Trust (NYSEArca: PSLV), but he remarked that “every dollar of money that was raised by selling shares of [the trust]… was reinvested in silver or silver equities.”
Despite the short-term bearish forces that have pummeled silver prices, bullish trends remain in the market, says Sean Brodrick, natural resource analyst.
Industrial demand, which accounts for 75% of the world’s supply of silver, is still growing, especially with the global economy projected to expand 4.5% this year. The already weakened U.S. dollar is also expected to remain at depreciated levels. Commodities such as silver are priced in U.S. dollars and they usually move in opposite directions. Additionally, silver supply remains relatively low as current rising demand outstrips the expansion of silver mine production.
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iShares Silver Trust
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SLV.
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