Just a few short weeks ago, investors seemed pretty certain that there wouldn’t be a Fed taper in December. However, thanks to recent growth outlooks and an extremely strong jobs report, fears of an end of year reduction in bond purchases are creeping back into the picture.
After all, the latest jobs report crushed the consensus, according to Bloomberg, with nonfarm payrolls increasing by 204,000 month-over-month. Furthermore, there were plenty of strong revisions for previous months, suggesting that the labor market is holding up pretty well (read High Dividend ETFs to Buy Even if the Fed Tapers).
Due to this strength, and some recent comments by Fed board members, bond yields are starting to rise in anticipation of a move by the FOMC. This has also had a drastic impact on a variety of safe haven-oriented products, such as in the precious metal market.
While gold often steals the show, silver has been a huge loser as of late too. And since the metal is often more volatile, in part due to its low price point, it can really take a hit when events are sliding against precious metals, like they are now (see all the Precious Metal ETFs here).
Silver ETF in Focus
Silver prices, as represented by the iShares Silver Trust (SLV - ETF report) were down over 2.9% on the day and the metal is now in danger of falling even lower when looking at charts. In fact, prices for the silver ETF are down over 5% in the past five days, and are well off of their 2013 peak, having lost over 30% in the YTD time frame.
And with the broad trends hitting the market, there is plenty of reason to worry about silver prices in the near term. This is particularly true when considering that short term moving averages have slumped below longer term ones, as this further suggests a bearish trend is intact.
Silver Miners Hit Too
This slump in the silver market also extends over to the precious metal mining space too. The Global X Silver Miners ETF (SIL - ETF report) was down about 2.7% on the session, continuing its bearish run. The product is actually down about 6.5% over the past five days, while its YTD return is an even more abysmal loss of 48%.
When comparing to gold miners such as with the Market Vectors Gold Miners ETF (GDX - ETF report), short term figures once again point away from silver. Gold has also faced weakness but has outperformed lately, though from a YTD look, gold miners are slightly underperforming, suggesting that silver miners are also falling by the wayside recently in the precious metals market (see Gold Mining ETFs in Trouble Again).
So while many investors may have been focused in on gold and gold mining stocks as of late, trading has been even more brutal in the silver space. This is despite the fact that the metal has a number of industrial uses, and isn’t as much of a safe haven play as its gold cousin.
This heavy industrial component hasn’t been enough to save silver lately though, as the metal has slumped heavily in recent trading. And given the increased likelihood of Fed tapering—and thus a stronger dollar—this sluggish trading could definitely continue for the precious metal, suggesting that investors should definitely approach silver ETFs with caution over the next few weeks.
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