Signs of Life for Silver ETF Investing

The iShares Silver Trust (NYSEArca:SLV) and ETFS Physical Silver Shares (NYSEArca:SIVR) have been struggling, but in what could be a sign of things to come, the two silver exchange traded funds gained about 2.4% last week.

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.

“Hedge funds or so-called managed money investors in silver futures have been exiting bullish positions at a rapid pace in recent weeks according to trader positioning data supplied by the government,” reports Frik Els for Mining.com.

Interestingly, data suggest that while professional traders are departing silver futures, investors are getting reacquainted with silver ETFs such as SIVR and SLV.

“These tactical and often short-term developments in hedge funds’ behaviour once again stand in sharp contrast to the behaviour of investors using exchange-traded products. Despite the recent price weakness, the total holdings in gold and silver ETPs have seen a steady increase — not least in silver where total holdings have returned to the record level reached last October,” Mining.com reports, citing a Saxo Bank note.

Related: Choosing the Right Precious Metal ETF for the Right Job

Declining silver production could crimp supplies going forward, in turn lifting prices.

“2016 was the first year in more than a decade wherein the primary silver production (coming from mines either as a main product or a by-product credit) decreased. After seeing a total silver production of approximately 668 million ounces in 2007 increasing to 891 million ounces in 2015, we saw a (first) decrease to 886 million ounces in 2016,” reports ZeroHedge.

To start the third quarter, SIVR and SLV have seen combined inflows of about $160 million after the two ETFs combined for second-quarter inflows of about $166 million.

For more information on the silver market, visit our silver category.

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