Silver prices and related exchange traded funds are outshining gold Tuesday, jumping on safe-haven hedges, cheap valuations and short covering.
On Tuesday, the iShares Silver Trust (NYSEArca: SLV) was up 4.3% and ETFS Physical Silver Shares (NYSEArca: SIVR) was 4.4% higher. Meanwhile, the SPDR Gold Shares (NYSEArca: GLD) rose 2.2%. The precious metal ETFs are now trading above their 50-day simple moving average. Year-to-date, SLV and SIVR declined 16.0% while GLD dipped 0.3%.
Precious metals surged on safe-haven demand as investors sought a hedge to the sharp sell-off in equities in response to Chinese policymakers’ efforts to rein in risks in its financial system and revived fears over another Greek crisis.
“The sell-off this morning was fundamental in nature over concerns in Greece and China,” Matt Maley, equity strategist for Miller Tabak & Co, said in a Bloomberg article.
Silver gains are pulling ahead as traders snap up the relative cheaper precious metal. Over the past four decades, the silver-to-gold ratio has hovered around 55-to-1, or the value of 55 ounces of silver to the value of one ounce of gold.
According to Kitco, the ratio is up to about 72-to-1. The higher ratio reveals that either silver is too cheap or gold is too expensive on a historical basis. COMEX silver futures are at $17.1 per ounce while COMEX gold futures are at $1,232.7 per ounce. [Surprises From Silver ETFs? Maybe]
Rising silver demand seems to support the idea that investors are reaching for cheaper silver. The U.S. Mint calculates that American Eagle silver bullion coins sales have reached 42.37 million ounces year-to-date, just shy of the historical high 42.68 million ounces sold in 2013, reports Ed Moy for NewsMax.
Moreover, short-covering could also be propelling gains. A short squeeze occurs when investors with heavy short positions are forced to cover, or buy back, their shorts in the event of positive reports that result in a share appreciation. Consequently, the additional buying momentum from short sellers covering their options contracts help bolster share prices even further. However, the ongoing U.S. dollar strength could keep silver from breaking out, despite short covering, writes Jim Bach for ETF Daily News.
iShares Silver Trust
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