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.
Over the past year, the iShares Silver Trust (NYSEArca: SLV) fell 26.8%, ETFS Physical Silver Shares (NYSEArca: SIVR) dropped 26.6% and PowerShares DB Silver Fund (NYSEArca: DBS) decreased 29.0%. In contrast, the SPDR Gold Shares (NYSEArca: GLD) dipped 16.1% over the past year.
Silver, like gold, is losing ground among investors seeking a hedge against market volatility or a store of value against inflationary pressures, reports Christian Berthelsen for the Wall Street Journal. Many market participants are anticipating the Federal Reserve to hike interest rates for the first time in almost a decade, which will diminish the attractiveness of holding assets with no yields.
“Silver can well be described as a hybrid metal—half precious, half industrial,” Bart Melek, head of commodity strategy at TD Securities, told the WSJ.
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 is getting whacked from both sides,” Ed Meir, a commodity analyst with brokerage INTL FCStone, told the WSJ.
COMEX silver futures have plunged 27% over the year and are now trading around $14.6 per ounce. Meanwhile, COMEX gold futures have declined 16% and are trading around $1,088.9 per ounce.