The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), two of 2016’s best-performing commodities exchange traded products for much of the year, scuffled in August as some market participants started pricing in a rate hike from the Federal Reserve later this year and its potential impact on precious metals.
Such a scenario could be a near-term drag on gold, silver and the relevant ETFs. Year-to-date, silver has mirrored the surge in gold in response to ongoing market volatility. Silver has exhibited a correlation of over 80% to gold and typically moves in the same direction as the yellow metal but in larger movements.
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 one or 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]
“From current levels down to around 18 lies solid horizontal support. Should the market continue to fade lower below this zone, then we will need to turn to the trend-line off the December low. To conclude in regards to market positioning – we will let the price action of silver determine when the market’s position has properly adjusted,” according to DailyFX.