It is widely known that gold and the corresponding exchange traded funds have been sturdy to start 2016. Though the iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) are each up about 8% over the past month, silver is lagging its yellow counterpart to start the new year.
Silver and the aforementioned exchange traded funds struggled in unison with other commodities last year as the U.S. dollar strengthened. SLV and SIVR both finished the year with double-digit losses that exceeded those of comparable gold ETFs.
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. That means heading into 2016 silver ETF investors face a confounding set of circumstances.
Some slack economic data has recently weighed on silver ETFs.
“On a global scale, the IMF released last month its revised GDP outlook, in which the global economic growth was revised down by 0.2% to 3.4% in 2016 and 3.6% in 2017. And the U.S. GDP was also slashed by 0.2% to 2.6% for both 2016 and 2017. This week, the U.S. GDP for Q4 (second estimate) will be released. It’s expected to present a growth rate of 0.5% — lower than the first estimate of 0.7%. Any lower growth rate could renew the bearish market sentiment and selloffs of equities, which could behoove the price SLV: The demand for silver as investment could rise because some investors consider it a safe haven investment,” according to a Seeking Alpha analysis of SLV.
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.
In the more mainstream demand side, silver jewelry demand is still rising due to increased consumption among emerging markets, notably in China where we are seeing a rising middle class with increased discretionary money.
On the supply side, silver miners are finding less deposits and producers are expanding into new projects, which suggests that silver could be in shorter supply ahead. [Silver ETFs on the Mend]
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.