Investing in Precious Metals: Why Silver is Outshining Gold
Investing in precious metals, such as gold and silver, has been a hot topic among investors lately, with renewed expectations of U.S. interest rate cuts in June driving interest in these assets. The lower interest rate environment has increased the demand for gold and silver, as these precious metals do not pay any interest, making them more appealing than alternative investments like bonds.
Both gold and silver are considered as a store of wealth for investors, especially during times of financial and political uncertainty. Factors such as the forthcoming U.S. presidential election, the ongoing Russia-Ukraine war, and the Israel-Hamas conflict have further enhanced the attractiveness of these metals to investors.
Gold has been hitting new all-time highs recently, while silver has reached a new two-year high. The SPDR Gold Trust ETF (GLD), which tracks the price of gold bullion measured in U.S. dollars, has gained 9.3% in the past month. On the other hand, the iShares Silver Trust ETF (SLV) has outperformed GLD, climbing 12.6% in the same timeframe. Additionally, other silver ETFs such as abrdn Physical Silver Shares ETF (SIVR) and Sprott Physical Silver Trust (PSLV) have also outperformed GLD, gaining 12.7% and 13.6%, respectively, in a month.
Silver has been outshining gold due to its use in key industrial applications. As the global economy improves, industrial and manufacturing demand for silver is picking up, which is driving silver prices higher. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry, silverware, coins, and medal manufacturers.
The Silver Institute predicts that 2024 could be a banner year for silver, with prices potentially hitting a decade-high. Global demand for silver is expected to reach 1.2 billion ounces this year, marking the second-highest level on record. The institute anticipates a 9% increase in demand for silverware and a 6% rise in jewelry demand this year, with India expected to drive the jump in jewelry purchases.
Furthermore, the global push for green energy, increasing demand in areas like 5G, a rebound in global computer shipments, and new sources of demand for sensors used in IoT and OLED lighting will continue to boost silver demand. Silver is widely used in manufacturing solar panels and electric vehicles, and will play a key role in the shift to 5G wireless network technology.
Investors looking to capitalize on the potential of silver can consider ETFs such as iShares Silver Trust (SLV), abrdn Physical Silver Shares ETF (SIVR), and Sprott Physical Silver Trust (PSLV). These ETFs offer exposure to the price movement of silver and have seen significant gains in recent months.
In conclusion, investing in precious metals like silver can be a lucrative opportunity for investors looking to diversify their portfolios and hedge against economic uncertainties. With the increasing demand for silver in industrial applications and the potential for higher prices in the future, silver ETFs could be a valuable addition to an investor’s portfolio.