Silver exchange traded products, namely the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), have strengthened in recent weeks with SLV and SIVR gaining 2% apiece over the past three months. However, some commodities market observers are expressing concerns about the integrity of silver’s recent jump.
Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction. The metal also maintained its momentum as the Federal Reserve lowered its interest rate outlook to only one or two hikes this year from a previously expected four rate hikes.
Options market data signal an interesting, potentially bearish scenario in the works for silver ETFs.
“Given that SLV’s put-call ratio is back toward historical lows, the contrarian indicator is exhibiting a “sell” signal here. Note that this isn’t a guarantee of a pullback, but is indicative that the probability of a short-term selloff is at a heightened level right now,” reports ETF Daily News.
Conversely, some metals market observer see silver supply falling coupled with rising prices.
“Silver supply is expected to fall this year, but it won’t fall as hard as demand, according to a new report by a leading precious metals consultancy,” reports BullionVault. “This will widen the metal’s “major surplus” say London-based analysts Metals Focus. Yet it expects silver prices will rise for a second year running thanks to strong buying by institutional investors.”
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward precious metals as a more stable store of wealth.
Moreover, unlike gold, silver sees much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy.
“Furthermore, a possible correction in equities and “capped upside” for the US Dollar against other major currencies – thanks in part to an improved situation in the Eurozone – could also support silver prices, together with numerous global political risks,” according to BullionVault.
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