The iShares Silver Trust (NYSEArca: SLV) and ETFS Physical Silver Shares (NYSEArca: SIVR), two of 2016’s best-performing commodities exchange traded products for much of the year, scuffled in August as some market participants started pricing in a rate hike from the Federal Reserve later this year and its potential impact on precious metals.
Recent data suggest market participants are getting over those Fed fears and are returning to silver ETFs in significant fashion. 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.
Making ETFs such as SIVR and SLV all the more appealing is the notion that industrial demand is the catalyst behind a recent surge in holdings for silver ETFs.
According to Thompson Reuters GFMS, the solar industry’s silver demand increased 23% last year, the second consecutive year of increases.
“Holdings in ETFs backed by silver climbed to the highest since they were created about a decade ago, according to data compiled by Bloomberg. This quarter, investors poured $625.5 million into iShares Silver Trust,, the most since 2010, data show. iShares owns more than half of total silver holdings in ETFs,” reports Luzi-Ann Javier for Bloomberg.
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.
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.
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iShares Silver Trust
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