In what has mostly been a banner year of performances by precious metals exchange traded funds, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have been soaring, but they have also been outpaced by the iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR).
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Year-to-date, silver has mirrored the surge in gold in response to ongoing market volatility. Silver has exhibited a correlation of over 80% to gold and typically moves in the same direction as the yellow metal but in larger movements.
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 two hikes this year from a previously expected four rate hikes.
While gold and silver are seen as tightly correlated with each other, it is possible the two metals could diverge, but for the moment, data suggest investors are allocating new money to both metals through GLD has recently some outflows.
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“GLD holdings, which account for more 45% of the global total, have seen inflows in 2016 of nearly 307 tonnes, but after peaking early July, 33.6 tonnes have been pulled out from the fund’s vaults since then, reducing the value of holdings by nearly $2.5 billion,” reports Frik Els for Mining.com.
Industrial demand is seen as a catalyst for SLV, SIVR and silver prices.
Bolstering the appeal for silver, the precious metal enjoys heavy industrial demand that benefits from an expanding global economy. Over 50% of global demand for silver comes from industries like chemicals, medicine and technological appliances.
“An improving outlook for the U.S. economy and Chinese manufacturing has also benefited silver, with industrial use accounting for more than half of the metal’s demand,” according to Bloomberg.
“Silver ETFs, just over the past month, have recorded over 9 million ounces or 280 tonnes of net inflows, bringing the total additions since the start of the year to a record 67 million ounces or 2,084 tonnes. Silver in ETF vaults have now grown to more than 21,000 tonnes or around 675 million ounces,” adds Mining.com.
For more information on the gold market, visit our gold category.
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Tom Lydon’s clients own shares of GLD.
This article was provided by our partners at ETFTrends.