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Silver's Long-Term Fundamentals Remain Bullish

Stock MarketsJun 10, 2021 10:30AM ET
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© Reuters. Silver's Long-Term Fundamentals Remain Bullish

Silver (SLV) has been on a tear since early April. There are many reasons to be bullish with increasing industrial demand as silver is used in solar panels and EV batteries. Taylor Dart provides an in-depth look at silver's fundamentals.While the S&P-500 (SPY) continues to get all the attention recently as value stocks come back into vogue, one asset class that continues to perform well with little attention paid to it is silver (SLV). As of Wednesday’s close, silver is up nearly 6% year-to-date, underperforming the SPY’s 12% return, but over the past year, SLV has easily outperformed the SPY, up 52% vs. the end of Q2 2020 vs. the S&P-500’s 36% return. This continued outperformance relative to both gold (GLD (NYSE:GLD)) and the S&P-500 is a very bullish sign for silver, given that this is when the precious metals complex performs its best. It certainly helps that we have sentiment that is nowhere near exuberant relative to other assets and a new multi-year high in inflation, emboldening the thesis for holding precious metals. With this backdrop, this is a clear buy-the-dip market. Let’s take a closer look below:

(Source: TC2000.com)

If we look at the chart above, we can see that silver (blue line) is not only outperforming the S&P-500 and has begun a new uptrend after a 10-year bear market vs. the S&P-500, but it’s also easily outperforming the GLD. This is although the S&P-500 has enjoyed one of its most impressive runs in history with a 93% return off the March 2020 lows. So, while the S&P-500 has outperformed silver this year, the bigger picture shows that silver has been outperforming recently, and this bullish trend should remain intact as long as silver holds above $24.00/oz. The outperformance vs. gold is also a very positive sign, given that silver underperforms gold massively when we are nearing the tail end of bull markets, with this occurring in late 2011 when gold made a new high above $1,900/oz, but silver did not. The fact that silver is making marginal new highs while gold is consolidating is a bullish setup, suggesting that it’s still massively leading the metal.

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Silver's Long-Term Fundamentals Remain Bullish
 

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