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Here's Why Silver Outshining Gold ETFs

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Precious metals like gold and silver have been the most sought-after commodities lately. This is because of investors’ drive for safe-haven investments amid growing risks emanated from rising virus cases, collapse in real bond yields, fears for prolonged global recession and ongoing uncertainty surrounding U.S.-China relation.

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.

Silver bullion ETF iShares Silver Trust (SLV - Free Report)  climbed 30% past month against the 5.5% gain in the gold bullion ETF (GLD - Free Report)  and 5.8% jump in the S&P 500. One of the best-performing silver mining ETF has been ETFMG Prime Junior Silver ETF (SILJ - Free Report) which has returned45.1% past month, followed by iShares MSCI Global Silver Miners ETF (SLVP) (up 41.3%) and Global X Silver Miners ETF (SIL - Free Report) (up 37.6%).

On the other hand, VanEck Vectors Gold Miners ETF (GDX - Free Report) (up 38.0%), Sprott Junior Gold Miners ETF (SGDJ - Free Report) (up 33.7%) and Global X Gold Explorers ETF (GOEX - Free Report) (up 33% past month) have lagged that of its silver peers.

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. So, the gradual reopening of global economies is helping silver more than the yellow metal as it means pickup in industrial activities.

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 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 (read: Bet on Europe ETFs After a Key Pandemic Deal).

Gold is already hovering around a record high level and silver is hovering around a six-year high. It means silver has more room for growth if the operating backdrop remains favorable. 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.

Given the optimism and intense buying pressure on silver, investors can bet on the above-mentioned silver bullion and mining ETFs. The surge in demand has pushed up holdings in exchange-traded funds backed by the metals to all-time highs.

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