Like other silver-backed ETFs, the Aberdeen Standard Physical Silver Shares ETF (SIVR) is scuffling a bit this year, particularly when measured against gold equivalents, but signs are mounting the white metal could be ready for more upside.
As it is, SIVR notched an April gain of nearly 7%, but research suggests there could be more to come for the ETF and the metal it allocates to.
“Global silver demand was pushed higher in 2019, with a 12 percent increase in investment demand as retail and institutional investors focused their attention on the long-term investment appeal of the white metal,” according to the Silver Institute. “Favorable structural changes, such as vehicle electrification and a rebound in the key field of photovoltaics, fueled solid industrial demand.”
Silver Could Shine
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.
“Total global silver demand in 2019 grew by 0.4 percent despite an ongoing global trade war affecting many industries,” according to the Silver Institute. “Silver industrial demand was resilient, slipping by 0.1 percent last year, with several key segments of silver industrial fabrication expanding, primarily silver’s use in photovoltaics, which grew by 7 percent to its second-highest annual level. Of note, for the fourth consecutive year, silver mine supply declined in 2019, falling by 1 percent.”
Investors can tap silver equities with the Global X Silvers Miners ETF (NYSEArca: SIL) and related ETFs. SIL, the largest silver miner-related ETF, tries to mirror the Solactive Global Silver Miners Total Return Index, which is also comprised of global silver miners.
Other data points indicate silver could indeed gain steam later this year.
“With the difficulties currently facing the global economy, key areas of silver demand — including industrial fabrication and jewelry and silverware offtake — are anticipated to fall this year, solely as a result of the global pandemic,” notes the Silver Institue. “Mine supply is expected to continue its decline given the temporary shutdown of mining operations in several significant silver mining countries in early 2020. Silver physical investment is forecast to extend its gains this year, with a projected 16 percent rise to a five-year high as investors rotate out of equities in search of safe haven vehicles.”
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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.