Silver exchange traded funds continued to surge, with silver futures hitting their highest level in almost seven years, as a weakening U.S. dollar, stimulus measures and favorable outlook for industrial silver demand helped bolster the precious metal.
Among the best performing non-leveraged ETFs of Wednesday, the iShares Silver Trust (SLV) was up 7.6% as Comex silver futures rose 6.7% to $23.0 per ounce.
Meanwhile, the ETFMG Junior Silver Miners ETF (NYSEArca: SILJ) advanced 2.7% and Global X Silvers Miners ETF (NYSEArca: SIL) increased 3.6%.
The U.S. dollar continues to depreciate for the fourth consecutive session on Wednesday, the Wall Street Journal reports. Rising coronavirus cases across the U.S. have weighed on the currency, with investors seeing betting on the healthier economic prospects in Europe and Asia, which have contained the pandemic more effectively.
Now that the dollar is weakening, the U.S. dollar-denominated precious metal is becoming more attractive for overseas buyers with stronger currencies.
Silver also climbed on expectations of more stimulus to help the global economy, with the European Union set to unleash a rescue package and the United States working on the second round of coronavirus pandemic relief. Traders are using precious metals to hedge against rising inflationary pressures as a result of the historic stimulus from world governments and central banks.
Additionally, silver could be outperforming on Wednesday after the European Union agreed on a €750 billion recovery fund, which earmarked 30% of spending on environmental initiatives and said funding of other projects has to be in line with the Paris climate accord, MarketWatch reports.
“The catalyst of the recent rally, however, seems to be the fact that the world is aiming for a ‘green’ recovery, with a significant part of the stimulus assigned to environmentally friendly measures,” Jeroen Blokland, senior portfolio manager at Robeco Asset Management, told MarketWatch. “As silver has a wide range of industrial uses, including electronics and solar panels, demand for this metal should rise from this angle as well. We remain overweight commodities as the outlook for both industrial and precious metals looks bright.”
Precious metals may have also enjoyed a small bump as a safety hedge after the United States told China to close its consulate in Houston, Texas. The escalating tensions between the two largest economies further add to the uncertain outlook.
“It seems the precious metal has been caught up in the perfect storm,” Blokland added.
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