After struggling in the latter stages of 2016, silver, the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are rebounding a bit this year. The two silver exchange traded products are both up more than 7% to start the new year.
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.
The Federal Reserve is targeting three interest rate hikes this year, which could white on precious metals, but some market observers believe there is upside to be had with the white metal.
There are some indicators that point to favorable times ahead for silver ETFs.
“The gold/silver price ratio has fallen 3.4% so far in January to 69.7 as the silver price outpaces gold but still has further room to catch up to the long term average of 59,” according to an ETF Securities note posted by Teresa Rivas of Barron’s.
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.
Bolstering the appeal for silver, the precious metal enjoys heavy industrial demand that benefits from an expanding global economy. Over 50% of global demand for silver comes from industries like chemicals, medicine and technological appliances.
Some commodities market observers see more upside coming for silver and the aforementioned exchange traded funds. It could just be a matter of investors properly timing new entries into the likes of SIVR and SLV.
“While silver has a correlation of 0.8 to gold historically, the majority of demand is tied to industrial applications (approximately 50%) making it a precious-industrial metal hybrid performing well along the broader industrial metal complex in recent months. Growing industrial applications including electronics, solar panels, and auto manufacturing (with news of Volkswagen debuting its “climate windscreen” which incorporates silver) against increased global manufacturing and industrial activity may continue to be a tailwind for silver,” according to the ETF Securities note seen in Barron’s.
For more information on the silver market, visit our silver category.