The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) stumbled to end 2016 as the dollar surged and Treasury yields spiked. That disappointment after a hot start to the year has some investors looking for better things out of the white metal in 2017.
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.
“Silver prices reached a generational high in 2011 and will collapse even further in coming years. Why? Supposedly the crushing deflation will rule the world for several years and prices for stocks, bonds, real estate, gold and silver will crash to unbelievable lows,” according to ETF Daily News.
Moreover, unlike gold, silver sees much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy.
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward precious metals as a more stable store of wealth.
Demand from India could also bolster silver ETFs this year. India has previously looked to curb gold imports to support the rupee and lower account deficits. Some market observers believe even small substitutions by Indian citizens from gold to silver could lead to significant upside for the white metal.
“Currencies are created by increasing debt and are backed by nothing but hope, faith and confidence. Exponentially increasing debt is not sustainable,” notes ETF Daily News.
For more information on the silver market, visit our silver category.
