Silver exchange traded funds have been stuck in a relatively narrow range after the big spring sell-off. Higher margin requirements and signs of life from the dollar have weakened the metals ETFs.
Still, the second half of the year has historically offered a good showing in precious metals prices.
The iShares Silver Trust (NYSEArca: SLV), which is backed by physical silver bars, saw more than 1,300 tons of silver removed from its vaults in 2011 through June 23, with some 500 tons liquidated from the fund in just a few days when silver prices peaked near $50 an ounce, writes Dr. Jeffrey Lewis for SilverSeek.
Silver continued its decline after U.S. jobless claims dropped to 428,000 last week and a spike in financial market uncertainty, reports Murray Coleman for Barron’s. [Metals ETFs Trade on Greece, Fed.]
According to a Barclay’s note, a “risk-off” trade in commodities shows the scope of the ongoing concerns. An estimated $7 billion was funneled out of commodities in May, “a level of outflow not seen since the financial crisis,” noted the analysts.
Barclays, though, remains hopeful on silver’s outlook, stating “the current combination of slowing global growth and rising CPI pressures are conditions which in previous cycles have seen commodities outperform most other assets.”
Additionally, precious metals have historically gotten a boost in the latter half of the year as prices jump on increased demand from Asia to celebrate traditional festivals and a peak in the marriage season in India.
According to Gene Arensberg for Resource Investor, technical traders are waiting to see if silver “respects” its May lows. If silver hovers around the $32 an ounce range, with a trading stop just under the $31.97 May low, then silver may be able to maintain a higher price trading range. However, if prices fall below that point, traders will expect silver and SLV to fall to a new, lower support level.
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iShares Silver Trust
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SLV.