There has been a rally in the metal and mining space. Be it silver, gold, copper, or uranium – most mining stocks and ETFs have been hovering around their 52-week highs. These prominent ETFs include the Physical Silver ETF (SIVR Quick QuoteSIVR - Free Report) , iShares Global Silver Miners Fund (SLVP Quick QuoteSLVP - Free Report) , Global X Gold Explorers ETF (GOEX Quick QuoteGOEX - Free Report) , Global X Copper Miners ETF (COPX Quick QuoteCOPX - Free Report) , and Global X Uranium ETF (URA Quick QuoteURA - Free Report) . These funds gained in the range of 6% to 3.6% on Friday itself.

Below we highlight the reason behind the rally.

Inside the Silver Rally

The strength of the greenback lessened last week on renewed Fed rate cut hopes. Invesco DB US Dollar Index Bullish Fund (UUP Quick QuoteUUP - Free Report) was off 0.5% last week. Since bullions are priced in the greenback, most bullions including silver rallied. Since mining stocks often act as leveraged plays of the underlying metal, related mining ETFs also surged last week.

Silver price has surged over 11% so far this month. Spot silver prices touched $32.28 on Monday (May 20, 2024), marking a 11-year high in the global market. Apart from its safe-haven recognition, silver is considered as an industrial metal. Most industrial metal prices are rising on concerns over supply disruptions.

Investors should note that if the Fed cuts rates by late 2024, industrial activities are likely to surge due to cheaper borrowing costs. The ECB is also expected to cut rates in June. These developments set the stage for a rally in industrial metals. Moreover, silver is a relatively better value play than gold. Most analysts believe that more rallies are expected for silver, as it has just entered overbought territory on the RSI in daily timeframes.

Inside Copper Rally

Copper surged to a record-high level, extending its intense rally, driven by deepening supply shortages. Tight supply of copper ore fueled talk of output cuts by smelters, while a short squeeze on the New York futures market this month caused a rally in the global copper market.

Being a crucial component of the energy transition, a global push for renewable energy has resulted in growing demand for copper, fueling the rally in its prices. It is also a key metal for cables used in data centers, whose growth has been fueled by an artificial intelligence boom (read: AI, EV Power Copper Price to New Heights: ETFs to Tap).

Inside Gold Rally

After wild swings, gold showed a strong rebound lately on cues of Fed rate cuts. Investors should note that if the Fed cuts rates, this would subdue the U.S. dollar. The subdued U.S. dollar and a decline in U.S. treasury bond yields would bolster the demand for the yellow metal. Moreover, gold is viewed as a safe-haven asset. The recent rise in geopolitical tensions in the Middle East and East Europe also led to strength in gold prices.

Central banks in emerging markets are seeking to lower reliance on the U.S. dollar for reserves holdings and are intending to hedge against inflation. Global central bank gold buying lifted annual (net) demand to 1,037 tons in 2023, just short of the record set in 2022 of 1,082 tons. Two back-to-back years of more than 1,000 tons of buying is proof of the recent strength in the central bank's demand for gold.

Inside Uranium Rally

The rise of AI has significantly increased the need for data center capacity to manage AI tasks and store the extensive data they demand. Data centers consume a lot of energy, and AI applications tend to use even more energy than standard computing (read: AI's Insatiable Energy Needs Boost Uranium ETFs).

Uranium, mainly used in nuclear power plants, is one of the most carbon-free ways to generate electricity. However, nuclear energy currently accounts for only about 10% of global electricity generation and about 20% in developed countries, including the US. While demand for uranium continues to rise, supply is scarce.