The iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR) are the toast of the commodities exchange traded products universe and there could be more upside ahead for silver following what’s recently been a remarkable run.
SIVR seeks to replicate, net of expenses, the price of silver bullion. The shares are backed by physically allocated silver bullion held by the custodian. All physical silver held conforms to the London Bullion Market Association’s rules for good delivery.
Unlike gold, much of silver demand is derived from industrial sources, putting the metal at the center of seismic technological shifts, such as 5G and renewable energy.
“Silver’s potential exposure to green stimulus is now an important tool in its armory, and should we see the same velocity of ETF flows evidenced in recent months continue through Q3 as macro asset allocators look to express ways to play a green recovery, both futures prices and silver-linked equities should benefit,” according to BMO Capital Markets.
Sizing up Silver Opportunities
Now that the dollar is weakening, the U.S. dollar-denominated precious metal is becoming more attractive for overseas buyers with stronger currencies.
Silver ETFs continued to surge, with silver futures hitting their highest level in almost seven years, as a weakening U.S. dollar, stimulus measures and favorable outlook for industrial silver demand helped bolster the precious metal.
Silver also climbed on expectations of more stimulus to help the global economy, with the European Union set to unleash a rescue package and the United States working on the second round of coronavirus pandemic relief. Traders are using precious metals to hedge against rising inflationary pressures as a result of the historic stimulus from world governments and central banks.
“More than $50bn of green stimulus has been approved by governments thus far this year, over which roughly three-quarters have been in Europe. But perhaps more impactful has been the recent Biden campaign Clean Energy plan, most notably a zero-carbon power grid by 2035 which would see new wind and solar capacity built to displace thermal generation,” notes BMO.
ETFs like SLV and SIVR are helping silver’s cause.
“Physically-backed ETF holdings of silver are up 35% since the start of the year, equivalent to 210Moz of silver, far and away a record … Were we to see further fund flows into ETFs, this could easily result in upward momentum being maintained,” according to BMO.
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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.