By Orchid Research
- SIVR has proven resilient since the US and China agreed on a Phase 1 trade deal over the weekend.
- However, we believe that the de-escalation of US-China trade tensions is likely to underpin a pro-risk rotation, undermining safe-haven demand in the near term.
- Next year, however, we expect the macro backdrop for silver (and gold) to prove more constructive, principally thanks to the Fed, willing to let the US economy run hotter.
- A discussion on the outlook for photovoltaic demand for silver.
- We are bullish on SIVR in Q1-20, with a price target of $19 per share.
Investment thesis
Welcome to Orchid’s Silver weekly report, in which we wish to deliver my regular thoughts on the silver market through the Aberdeen Standard Physical Silver Shares ETF (SIVR). SIVR has proven resilient since the US and China agreed on a Phase 1 trade deal over the weekend.
However, we believe that the de-escalation of US-China trade tensions is likely to underpin a pro-risk rotation, undermining safe-haven demand in the near term. In this regard, our Q4-19 target of $18.50 per share is unlikely to be reached. Importantly, we argue that the macro backdrop for silver should turn friendlier next year (like gold), principally because the Fed is willing to let the US economy run hotter, which should pressure the dollar and US real rates lower. As long as silver trades as a safe-haven, we expect SIVR to move higher over the next three months, with a target of $19.00 per share.
In this week’s report, we also discuss the outlook for photovoltaic demand for silver.
About SIVR ETF
SIVR is an ETF product using a physically-backed methodology. This means that SIVR holds physical silver bars in HSBC vaults. The physically-backed methodology prevents investors from getting punished by the contango structure of the Comex silver forward curve (forward>spot), contrary to a futures contract-based methodology. For long-term investors, SIVR seems better than its competitor SLV, principally because its expense ratio is lower (0.30% for SIVR vs. 0.50% for SLV), which is key to make a profit over the long term.