The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are each up more than 3% over the past week and those moves have brought the well-known silver exchange traded funds to important technical junctures.
SIVR and SLV are now bumping up against a critical resistance area on their respective charts and if silver prices continue moving higher, the ETFs could be poised to notch some big gains in the near-term. 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.
Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction. 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. The Fed raised rates for the first time this year earlier this month.
“Gold is doing better, with an 8.47% gain. But silver is sprinting, with a 13.5% gain. If silver keeps up this pace, that would work out to a 65% gain for the year. Now, there’s nothing to say silver must keep up that pace. It could slow down. Then again, it could speed up. We’re in a new precious metals bull market, after all,” according to ETF Daily News.
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.
Importantly, silver production is declining.
“In fact, production from silver mines peaked in 2015, according to GFMS Thompson Reuters. And it should keep going down,” reports ETF Daily News. “Silver is an industrial metal as well as a precious metal. Industrial fabrication makes up about 50% of silver demand each year, vs. less than 10% for gold demand. Silver is used for all sorts of things, from wiring in cell phones to chemical reagents to the paste used in solar cells.”
For more information on the silver market, visit our silver category.