Among commodities exchange traded products, the iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR) are scintillating stories and while pullbacks are to be expected with this volatile commodity, some market observers believe silver can continue accruing upside.
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.
Silver prices and related ETFs have surged on improving fundamentals with demand-side support due to the coronavirus uncertainty, stimulus measures, and recovering industrial sector. On the other side, supplies are dwindling as well.
“Silver is often called the ‘poor man’s gold’ because some of the same factors that cause gold prices to rise to do the same thing to silver prices,” says Ed Moy, chief market strategist at gold retailer Valaurum, reports Myra Saefong for Barron’s.
Sizing up Silver
Supply disruptions have also helped fuel the rally in silver markets. Mines in Peru and Mexico, which make up almost 40% of world supply, have shut down en masse earlier this year as a result of the Covid-19 pandemic, Bloomberg reports.
While much of the industry is turning the lights back on, some mines have had to shutter operations again due to the Covid-19 resurgence.
According to Barron’s: Ross Norman, CEO of precious-metals news and information provider Metals Daily, says the ratio between the metals rose to a 4,000-year high at 126 on March 18. “It has been clear for some time that silver was excessively cheap compared to gold,” he says. The ratio is still historically high, “suggesting there is scope for greater gains in silver still.”
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.
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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.