Silver and related silver ETFs have weakened along with gold this year, but this precious metal has suffered a particularly heavy blow.
Year-to-date, the iShares Silver Trust (NYSEArca: SLV) declined 16.5% and ETFS Physical Silver Shares (NYSEArca: SIVR) decreased 16.5%, falling off about 8% in the month of August alone, and they are both trading at their lowest level since the start of 2016. Comex silver futures are now hovering around $14.2 per ounce.
Silver has been underperforming in the precious metals space. In comparison, the SPDR Gold Shares (NYSEArca: GLD), the largest gold-related ETF, only dropped 8.4% so far this year, with Comex gold futures trading around $1,205 per ounce.
Potential weakness in global manufacturing has been a particular worrying development for the silver market. While silver is classified as a precious metal, it is still used in a range of industrial applications from electronics to jet-engine manufacturing, which makes the metal sensitive to global economic trends, the Wall Street Journal reported.
Silver market industrial demand outlook
The global economic picture has come into question as an intensifying trade war between the U.S. and China, along with problems in the broader emerging markets, weighed on the silver market and the industrial demand outlook.
Further dragging on silver prices, a strengthening U.S. dollar has made it more expensive for foreign buyers. The U.S. Dollar Index, which tracks the U.S. dollar’s moves against a basket of foreign currencies, has increased 4.5% so far this year. Precious metals have traditionally exhibited an inverse relationship to the greenback.
Related: Silver ETFs Retreat as U.S. Dollar Strengthens
Traders often steer toward safe-haven bets like silver during times of market volatility, but the recent rise in the U.S. dollar has discouraged many from buying the physical asset during the most recent bout of market swings.
“Silver prices are getting hit from two sides,” George Gero, managing director at RBC Capital Markets, told the WSJ. “Buyers and bargain hunters are looking for lower prices to re-enter the market. But not at these levels.”
Looking ahead, silver and other precious metals may continue to face an uphill struggle as the Federal Reserve is expected to keep hiking interest rates, which makes non-yielding assets like commodities less attractive.
For more information on the silver market, visit our silver category.