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, are, like other precious metals plays, coming off a rough August.
Due to the fact that seasonal trends are often more impactful with commodities than other asset classes, investors may want to tread carefully with silver ETFs this month because September is historically unkind to the white metal.
SEE MORE: 11 Silver ETFs Outshining the Competition
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]SLV “tends to fall in September. It only moves higher in September about 40% of the time, and tends to drop by 2.5% on average. This year could be worse as the Silver Trust is currently in a correction following a massive eight-month surge,” according to Investopedia.
While it seems unlikely that the Fed will raise interest rates this month, any speculation regarding increased likelihood of rate hike later this year could pressure silver and other commodities in the near-term. That might explain why along with silver ETFs, gold ETFs tumbled in August.
SEE MORE: Analysis – Silver ETFs Are Outshining Gold
Following a rally of this size, and at this stage of the trend, the price is likely to retrace approximately 50% of the 2016 advance. Based on that, SLV is expected to drop to between $16.38 and $15.71 in September. While a 2.5% drop in September is typical, it will take an 8% drop for the price to reach the typical retracement area ($16.38 to $15.71),” adds Investopedia.
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
