Following a lengthy losing streak that started in April and ran into May, the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR) are showing signs of life. Last week, the two physically-backed silver exchange traded funds each gained more than 3%, but market participants have diverging near-term views on the white metal.
Silver will enjoy industrial demand – abound 50% of silver demand comes out of industrial related industries like solar, electronics and automobiles. Due to its more cyclical nature, silver shows a 80% correlation to gold. Silver may continue to enjoy greater demand as industrial production speeds up. That puts the white in metal an interesting position amid decent, but not spectacular U.S. economic growth. However, Europe’s economic growth is rebounding.
Silver mining capital expenditure has been sliding, which has cut into supply. Silver has been in a supply deficit for the past 11 years and the ongoing decline in mining investments will contribute to further deficits. Falling supplies could bolster prices going forward.
“Hedge funds or so-called managed money investors in gold futures and options reduced their exposure to the yellow metal in recent weeks, but silver speculators have been exiting bullish positions at a head spinning pace according to trader positioning data supplied by the government,” reports Frik Els for Mining.com.