The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) have set a torrid pace this year, but as the white metal continues notching upside, some traders are concerned about pullbacks.
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 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]
Currently, silver finds itself in a pivotal technical position.
“A year ago we noted that silver was possibly forming one of the largest Cup-and-Handle patterns seen in a long, long time. At the time, silver was trading near $14,” according to Investing.com. “Since then, silver has rallied more than 40%.”
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.
“Now it’s facing a serious breakout test, as five different resistance lines all meet at one price point. If weakness starts happening, it could be dangerous for the silver risk-on trade,” adds Investing.com.
Silver prices touched two-year highs earlier this month. Traders looking to profit from silvers downside can consider the ProShares UltraShort Silver ETF (NYSEArca: ZSL), which is a double-leveraged product.
For more information on the silver market, visit our silver category.
iShares Silver Trust