The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) have spent considerable time ranking as two of 2016’s best-performing non-leveraged commodities exchange traded products. One reason for that trend could be that this is a presidential election year.
Silver ETFs declined 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. 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.
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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.
Some market observers also believe silver displays a correlation to the rising national debt, which plays a part in the white metal being a bullish play in presidential election years.
“The price of silver is more erratic than the official national debt, which increases consistently, regardless of which group of borrow and spend politicians is supposedly in charge,” according to ETF Daily News. “But it is clear that silver prices are increasing exponentially, similarly to the increase in national debt, increase in currency in circulation, and probably the increase in Wall Street bonuses, food stamp (SNAP) payouts, Federal Reserve salaries, and the prices of cigarettes, postage, beer, food, tuition, health insurance, and prescription drugs.”
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According to Thompson Reuters GFMS, the solar industry’s silver demand increased 23% last year, the second consecutive year of increases.
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.
“Politicians will borrow and spend until they no longer can borrow. Hence national debt will exponentially increase until the system resets,” adds ETF Daily News. “Exponential increases in debt parallel increases in the prices of many goods, services, and commodities, including silver.”
For more information on the silver market, visit our silver category.