The iShares Silver Trust (NYSEArca: SLV), the largest exchange traded fund backed by physical holdings of silver, has tumbled more than 10% over the past month and was recently in the midst of one of its worst losing streaks since coming to market nine and a half years ago but it could be time to apply the “be greedy when others fearful” maxim to the silver trade.
Silver has has experienced back-to-back selling since the October Federal Open Market Committee announcement, which pointed to a December rate hike, and the strong October jobs report, which also fueled the case for tighter monetary policies.
Technical investors, though, may argue that silver could bounce back over the short-term as the relative strength index, a technical momentum indicator, suggests that SLV is oversold after the consecutive selling pressure.
“Silver has gotten smoked, losing more than 10 percent of its value in a nearly unremitting drop over the past 2 ½ weeks. But that might present nimble traders with an opportunity to play for a bounce, according to investment advisor Neil Azous of Rareview Macro,” CNBC reports.
Earlier this year, Barclays analysts project silver prices will continue to decline 20% in the coming year. Last month “HSBC lowered its 2015 silver price forecast to $15.60 from $17.05 per ounce and its 2016 forecast to $16.90 from $18.25. It lowered its 2015 forecast for platinum to $1,126 from $1,170 per ounce and its 2016 forecast to $1,235 from $1,350. The bank reiterated that it expects gold prices to bounce back to $1,205 per ounce by the end of the year on emerging market buying,” according to the Economic Times.
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.
“Commodities tend to trade inversely to the dollar, since as the greenback increases in value, it takes fewer dollars to buy the same amount of a fixed asset. The U.S. currency’s recent strength has contributed to commodities’ weakness,” adds CNBC.
Traders with a strong conviction that silver prices will continue to dip can utilize inverse silver ETF options to play the fall. More aggressive traders can take a look at the VelocityShares 3x Inverse Silver ETN (NYSEArca: DSLV), which takes the -300% performance of silver, and the ProShares UltraShort Silver (NYSEArca: ZSL), which takes the -200% performance of silver price movements.
iShares Silver Trust
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.