The SPDR Gold Shares (NYSEArca: GLD) and some rival gold exchange traded products are up more than 27% year-to-date. That sounds impressive until looking at the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), both of which are up more than 46%.
While that might imply silver is due for a pullback, some market observers see the white metal continuing its out-performance of gold. Unlike gold, palladium, platinum and silver see much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy.
“The Brexit vote has increased expectations of further monetary easing by central banks, which means interest rates could be kept lower for longer. That makes precious metals like silver and gold attractive to investors who are concerned about general economic uncertainty and seeking a safe-harbor asset,” reports Alexandra Wexler for Barron’s.
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.[related_stories]
Looking ahead, the quickly expanding photovoltaic panel or solar industry could continue to drive silver demand. Installations and investment in solar panels, which incorporate silver for its electrical conductivity, are at record levels, reports Henry Sanderson for the Financial Times.
According to Thompson Reuters GFMS, the solar industry’s silver demand increased 23% last year, the second consecutive year of increases.
“On a longer horizon, though, the metal looks set to soar. Global silver production fell in 2015 after 12 years of steady increases in supply, according to the World Silver Survey, published by the Silver Institute, an industry lobby group, and metals consultancy Thomson Reuters GFMS. That decline was due in large part to aging mines and a lack of new mines coming on-line due to low prices over the past few years—a trajectory that will take some time to revers,” according to Barron’s.
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iShares Silver Trust
Tom Lydon’s clients own shares of GLD.
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.