For much of this year, precious metals exchange traded products, including the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), have been leading the commodities resurgence. Recently, however, risk on sentiment coupled with a rebounding U.S. dollar has dented the precious metals trade.
Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction. The metal also maintained its momentum as the Federal Reserve lowered its interest rate outlook to only two hikes this year from a previously expected four rate hikes. Additionally, with the dovish Fed stance, the U.S. dollar weakened, which made USD-denominated silver cheaper for foreign buyers and a better store of value for U.S. investors.
Silver prices touched two-year highs earlier this month. Since, profit-taking has been evident, making proper positioning in ETFs like SLV and SIVR crucial.
Regarding SLV, “while it could retrace further, multiple support levels loom beneath it. The $17 level in particular should act as a bastion of strength going forward. It kept a lid on prices for months on end, and if the time-tested adage of old resistance becoming new support holds true, look for buyers to come out of the woodwork,” according to InvestorPlace.
Related: Analysis: Silver ETFs Are Outshining Gold
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward precious metals as a more stable store of wealth.
“The 50-day moving average is also nestled close to $17, providing further significance to that level. But perhaps we’re getting ahead of ourselves. After all, the last upswing in SLV was accompanied by some insane momentum, not to mention heavy, heavy volume. As such, the current pullback may remain shallow if anxious buyers rush in,” adds InvestorPlace.
As growth improves and inflation rises, we are back to waiting for an eventual Federal Reserve interest rate hike, which may trigger market fears over policy mistakes and potential pressure growth.
Related: Attractive Fundamentals Could Further Support Precious Metals ETFs
For the precious metals market, traders will have to keep close tabs on the Fed as gold has been closely correlated to real interest rates. Investors have seen gold outperform in negative interest rate periods.
iShares Silver Trust
