Silver exchange traded funds are on a torrid pace this year and as is often the case with gold and gold miners ETFs, silver miners funds are outpacing physically-backed silver ETFs in a big way. For example, the iShares MSCI Global Silver Miners ETF (NYSEArca: SLVP) hit a 52-week high on Monday and has nearly doubled in value this year.
There is a growing number of silver market observers that believe the metal has more significant upside ahead. 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.
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.
What could drive more upside for the likes of SLV and SIVR is a familiar catalyst for commodities: Growing demand and dwindling supply.
The gold/silver ratio also indicates the white metal is undervalued relative to its yellow counterpart, meaning there is room for big upside ahead for silver and silver miners ETFs.[related_stories]
“One reason to believe they will continue to rally is the price ratio of gold to silver. It currently sits at more than 75-to-1. This is well above the historical average for the past 40 years of about 50-to-1, and similar spikes in the ratio have often led to buying demand in silver,” according to InvestorPlace.
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.
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.
“SLVP is now in an intermediate uptrend with support at $8.60 and resistance at $14. Try to buy shares under $9 with a trading target of $14 for a potential return of more than 55%. Long-term investors may want to hold SLVP for an even bigger gain if the price ratio of gold to silver moves closer to its historical average,” adds InvestorPlace.
iShares MSCI Global Silver Miners ETF