Silver Slump Has Investors Skirting Away From Metal as Gold Steadies

Gold is showing signs of steadying, but metals with industrial applications, including silver are flailing. For example, the  iShares Silver Trust (SLV)  is lower by more than 28% this month, representing nearly all of its year-to-date loss.

“The white metal, used in solar panels, jewelry, and electronic components, is down 28% in the past eight sessions, the worst streak since 1983, as the coronavirus disrupts global economic activity, weakening consumption of industrial raw materials,” reports Bloomberg. “The demand outlook is worsening at a time when silver already facing oversupply.”

Silver is disappointing on another front: it’s betraying a usually inverse relationship to interest rates.

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.

Sour on Silver

“Silver also suffered as investors recently exited precious metals across the board in their rush to sell gold. The pricier yellow metal tumbled 11% in the five sessions through Monday as money managers seek to raise cash to cover losses in other assets.” according to Bloomberg. “Gold is now back in vogue, rallying 2.7% on mounting speculation that central banks will take more action to quell market anxiety.”

As long as economic and geopolitical instability continue to rule, there may be more significant precious metals involvement.

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.

Traders looking to amplify gains with silver can be considered geared products, such as the VelocityShares 3x Long Silver ETN Linked to the S&P GSCI Silver Index ER (NasdaqGM: USLV) and the ProShares Ultra Silver (NYSEArca: AGQ).

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.