The Strength of Silver Lurks Quietly in the Background

Rising silver prices may have been lost in the shadow of gold’s rally near the end of the first quarter. But the prospect of rate cuts could bode well for the metal moving forward.

Like gold, silver prices shot higher near the end of a mostly sideways trading Q1. As a result, the year-to-date gain of the S&P GSCI Silver pushed past 16% in April before retreating recently.

Green energy initiatives have been giving the white metal fundamental tailwinds. That gave way to record industrial demand in 2023. The white metal’s use in green energy technology like solar panels and electric vehicles give it an industrial component alongside its use as a precious metal.

Another catalyst for the metal will continue to be the prospect of the Federal Reserve easing monetary policy. The central bank opted to keep rates unchanged yet again at the latest meeting. But they eased investor worries regarding stubborn inflation by dismissing the prospect of more rate hikes.

When the higher-for-longer interest rate narrative finally ceases and rate cuts are instituted, that could be a boon for the metal. In the meantime, prices for this precious metal have retreated due to rate cuts getting pushed back further than expected. But that should leave the door open for investors to buy on the dip.

“If we have a look at all these commodities, they could be in better shape right now because their price schedule is cyclical: when we have an economic downturn, they are cheap; when the economy is in recovery, they are expensive,” said Julia Khandoshko, CEO at Mind Money, via a Kitco News report. “There is an obvious economic downturn now, so they are performing poorly. After the future rate cut, we can expect economic growth. And then, the time for silver will come.”

^SGSA Chart

SGSA data by YCharts

Two Options for Silver Exposure

If gold continues its climb higher and silver subsequently follows, investors don’t need separate capital allocated to both metals. An alternative is to get exposure to both with one fund using the Sprott Physical Gold and Silver Trust (CEF). The fund is a closed-end trust that invests in unencumbered and fully allocated physical gold and silver bullion in LGD bar form. Overall, the goal of CEF is to provide a secure, convenient, and exchange traded investment alternative for investors who want to hold physical gold and silver without the inconvenience typical of a direct investment in physical bullion.

However, investors who want only to allocate to silver will want to look at the Sprott Physical Silver Trust (PSLV). The fund provides exposure to the precious metal without the additional hassle of storing it. It invests in unencumbered and fully allocated London Good Delivery silver bars. As mentioned, shareholders can redeem their shares for physical bullion anywhere in the world (subject to certain minimum conditions).

For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.