Precious metals like gold and silver have been the most sought-after commodities lately. This is because of investors’ drive for safe-haven avenues amid a broad market turmoil following the coronavirus contagion, collapse in bond yields, continued global recession fears and ongoing uncertainty surrounding U.S.-China relation on the Hong Kong issue.
Additionally, extra-loose monetary policies across the globe added to the metals’ strength. The Fed cut rates to zero and launched an unlimited QE to contain the coronavirus-led economic slump. Lower U.S. rates should weigh on the dollar against a basket of currencies, raising the precious metals’ attractiveness as these do not pay interest like fixed-income assets.
Silver Outshines Gold
Investors are flocking to gold in droves as they see the yellow metal a great store of value and hedge against market turmoil, leading to a steep jump in prices. But silver prices are appearing stronger than the yellow metal. Silver started catching up with the gold rally and has been outshining in recent weeks (read: ETF Asset Report of May).
Silver bullion ETF iShares Silver Trust (NYSE:SLV) SLV climbed 22.3% past month against the 3% gain in the gold bullion ETF GLD (NYSE:GLD) and 4.9% jump in the S&P 500. The best-performing silver mining ETF has been ETFMG Prime Junior Silver ETF SILJ which has returned 24.9% past month, followed by iShares MSCI (NYSE:MSCI) Global Silver Miners ETF SLVP (up 15.9%) and Global X Silver Miners ETF SIL (up 13.1%).
On the other hand, Sprott Junior Gold Miners ETF (NYSE:GDX) SGDJ (up 16.2% past month) has become the top-performing gold mining ETF, followed by Global X Gold Explorers ETF GOEX (up 12.1% past month) and VanEck Vectors Junior Gold Miners ETF GDXJ (up 11.6% past month) (read: Gold Mining Q1 Earnings Mixed: ETFs Gain on Fundamentals).
How Silver Manages to Top Gold
Along with gold, the risk off trade environment is driving silver prices higher, as the white metal is regarded as a store of wealth and an alternative investment to risky assets during economic and political uncertainty.
Silver is often considered as an industrial metal too. About 50% of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers.
So, the reopening of global economies is helping silver more than the yellow metal as it means pickup in industrial activities.
Notably, China’s official manufacturing Purchasing Manager’s Index as well as a private survey, both showed manufacturing activity in the country gaining in May. U.S. manufacturing too started to stabilize in May ending a four-month long decline, per ISM survey.
Growth in the global solar PV industry, likely rebound in global computer shipments, as well as new sources of demand for sensors used in IoT and OLED lighting are providing a boost to silver demand. A raft of global stimulus including the latest announcement from the European commission of borrowing 750 billion euros should work wonders for this white metal.
Amid the latest developments, silver has won an edge over the gold as the white metal is likely to continue climbing due to increase in industrial demand, and the yellow metal would come under pressure. Given the optimism and intense buying pressure on silver, investors can bet on the above-mentioned silver bullion and mining ETFs.
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iShares Silver Trust (SLV): ETF Research Reports
iShares MSCI Global Silver and Metals Miners ETF (SLVP): ETF Research Reports
Global X Silver Miners ETF (SIL): ETF Research Reports
ETFMG Prime Junior Silver Miners ETF (SILJ): ETF Research Reports
Sprott Junior Gold Miners ETF (SGDJ): ETF Research Reports
VanEck Vectors Junior Gold Miners ETF (GDXJ): ETF Research Reports
Global X Gold Explorers ETF (GOEX): ETF Research Reports
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