Recent pressure in the precious metals complex is hampering silver. For example, the iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR), two of the largest ETFs backed by holdings of physical silver, are more than 12% removed from their 52-week highs.
However, some commodities market observers believe the recent silver decline is poised to give way to some near-term upside.
“Markets have been going higher over the longer term, but the last couple of months have been a bit rough for precious metals. Perhaps this is due to the fact that the Federal Reserve is now on the sidelines, and not necessarily expected to cut interest rates,” reports FX Empire.
The Silver Push
Silver ETFs are pushing to the upside amid increased expectations of more Federal Reserve rate cuts, even as some investors locked in profits from the white metal’s recent rally. Silver is believed by many investors to be inversely correlated with interest rates.
Rising interest rates make bonds and other fixed-income investments more attractive so that the money will flow into higher-yielding investments, such as bonds and money market funds, and out of precious metals, which offers no yield at all during times of higher interest rates, and back into metals ETFs.
“Headlines continue to rock the markets occasionally, driving money into the metals,” reports FX Empire. “One would have to think it’s only a matter of time before something goes wrong in the US/China situation that causes a bounce. However, if we do break down below the $16.35 level, then we will have wiped out all of the supportive technical indicators and start reaching towards the $16.00 level, possibly even the $15.00 level.”
Traders looking to juice short-term silver gains can consider leveraged products, such as the VelocityShares3x Long Silver ETN (USLV). USLV seeks to replicate, net of expenses, three times the S&P GSCI Silver Index ER. The index comprises futures contracts on a single commodity. The fluctuations in the values of it are intended generally to correlate with changes in the price of silver in global markets.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.