The iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR) are lagging gold rivals this year, but the silver ETFs have been perking up as of late and some market observers believe there’s more upside in store for the white metal.
Silver ETFs have been outperforming, with silver prices hitting a 10-month high last Monday, as rebounding industrial demand and a surge in safe-haven investor demand help strengthen the precious metal.
“The mining and materials equity team at RBC Capital Markets has raised its silver price forecasts by 16% in 2020, 17% in 2021 and 14% in 2022,” reports Northern Miner. “RBC now forecasts silver prices will average $17.76 per oz. this year, $18.75 per oz. next year, and $18.50 per oz. in 2021.”
Precious metals have strengthened in recent months after the aggressive stimulus measures out of global central banks and world governments to prop up economies weakened by the coronavirus pandemic. The interest rates cuts out of the Federal Reserve and others have lowered the opportunity cost of owning precious metals, which do not come with a yield. Furthermore, many anticipate the aggressive stimulus measures to inundate the global economy with cash, which would drive up inflation and make hard assets a more attractive play to safeguard purchasing power.
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.
“While we continue to assume year-on-year declines in global GDP and industrial production (IP), we now think there could be a better outcome than previously expected, reflecting recent strength across industrial sectors in China, supportive global central bank stimulus and apparent rebounds in global PMIs,” according to RBC.
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.
“Notably, physically-backed silver ETF holdings have risen +140 million ounces over the past three months, and this appears to have continued to support prices in recent weeks. We now add significant ETF build into our demand forecast to reflect likely further investment interest,” notes RBC.
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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.