The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are each up about 9.7% to start 2017, an advantage of 380 basis points over the comparable gold exchange traded products.
Some commodities market observers believe that divergence between gold and silver is a positive for the white metal. Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction.
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.
“In silver, there is quite a bit more volatility in the basis. And though the March cobasis is up, farther contracts do not show the same move,” reports ETF Daily News. “Our calculated fundamental price did move up a bit—15 cents. However, it did not keep up with the market move. So now it’s basically even with the market price. It turns out speculators did think that silver ought to outperform gold, and they tried. They caught up to and passed the buyers of physical metal.”
On a related note, some gold market observers believe bullion is on the cusp of a significant move, but few are voicing clear opinions regarding the direction of that move. That point is underscore by outflows from GLD to start the year.
Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
“We note that in the futures market, the open interest in gold turned down sharply starting last week. However, silver open interest diverged, and continued to skyrocket,” according to ETF Daily News.
Year-to-date, investors have pulled just over $107 million from SLV.
For more information on the silver market, visit our silver category.
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