Silver commodities and ETFs are continuing to surge higher Thursday. They added to their more than $1 move during the prior session. This comes amid U.S. reports of weaker-than-expected inflationary pressures.
Although often seen as less valuable than gold, silver for the September month contract is currently outperforming. Silver rocketed another 2.61% to reach $24.94 as of almost 1:30 p.m. EST.
Despite the upswing, Bart Melek, head of commodity strategy at TD Securities, admonished investors that the shiny commodity still needs to see a major boost in investor demand and renewed industrial interest, if it is going to break free from the roughly $23 an ounce it has seen lately.
“Concerns surrounding higher-for-longer interest rates, a lack of speculative appetite, less physical demand amid Chinese economic weakness, and a pending U.S. recession suggest the silver market is set to be looser than the projected 110koz annual deficit this year suggests,” he said. “Consequently, silver is projected to trend near a low $23/oz for much of the next three months.”
However, Melek added that he sees significant opportunities for silver to rally by the close of 2023. But only if the Federal Reserve begins to slash rates as recession conditions are ameliorated.
“As it becomes clear that the Fed and other central banks will start to pivot to a more dovish monetary policy stance in the early months of 2024. Boosting the prospects for an economic recovery on the horizon, we expect the white metal will set its sights towards $26/oz in the final days of 2023,” he said.
The Green Trend May Be Helping Silver Prices
Recently, silver has become more popular with those expecting increased industrial demand to spur prices of the metal higher. This is driven by the global green energy transition.
Analysts were initially projecting that industrial demand would drive the silver market lower. But Melek said that he was skeptical the market will fall much more. He pointed out that the Federal Reserve’s aggressive interest rate policies have diminished investor demand. But that could be changing soon.
According to an analysis from fxstreet.com, “In the very long term, silver is expected to trade significantly above the $26 mark. And should increasingly decouple from gold, as its ties to the interest/lease rate environment weaken.” This is good news for silver bulls.
Investors looking to get silver exposure without having to hold it physically can look to ETFs. The Aberdeen Standard Physical Silver Shares ETF (SIVR) and iShares Silver Trust (SLV) can help track the silver market.
SIVR, which is up over 2.46% Thursday, uses a physically-backed methodology. This is an idea that was popularized by ETFs due to investors growing tired of the complexities of futures contracts and the associated dangers. By using this strategy, this fund can eliminate the issues of contango and backwardation. It can also give investors more realistic pricing of the metal it holds.
Additionally, the ProShares Ultra Silver ETF (AGQ) and the Invesco DB Silver Fund (DBS) are two other funds that focus on the silver market.
For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.
