The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are two of this year’s best-performing commodities exchange traded funds, but investors are not flocking to silver as the white metal surges.
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 boosted borrowing costs in March.
“While the price of silver is near the highest in five months and money managers are the most bullish on record, the rally has failed to convince buyers of exchange-traded funds backed by the metal. Money is flowing out of iShares Silver Trust, the biggest such ETF, for a seventh straight month, the longest slump in more than a decade,” reports Luzi Ann Javier for Bloomberg.
While money has flowed out of SLV over the past seven months, that ETF and the rival SIVR are each up just under 5% over the past six months. Both are outperforming the largest gold ETF by nearly 200 basis points over those six months.
Even if safe-haven demand for hard assets abates, silver exchange traded funds could continue to find support out of the industrial sector as the precious metal is a major component in many manufactured products.
For instance, silver used in the photovoltaic panel industry is growing and could reach record levels in 2018, Maxwell Gold, Director of Investment Strategy for ETF Securities, said in a note.
“Meanwhile, money managers boosted their net-long position, or the difference between wagers on price gains and bets on declines, by 5.5 percent to 98,845 futures and options in the week ended April 11, the highest in U.S. government data going back to 2006. That helped propel prices on Monday to $18.655 an ounce, the highest since November. The contract for May delivery fell 0.3 percent to $18.225 at 8:11 a.m. in New York on Wednesday,” according to Bloomberg.
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