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Silver or Gold: Which ETFs Should You Buy for 2H 2024?

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Silver and gold are again grabbing investor attention following bouts of softer U.S. data, which boosted prospects of an interest rate cut by the Fed in September. Markets are now pricing in a 78% chance of a September rate by the Fed, according to CME's Fedwatch Tool. Traders are also pricing in a rising chance of a second rate cut in December.

A lower interest rate environment raises the demand for gold and silver, as the precious metals do not pay any interest, making them more appealing than alternative investments like bonds. Both the yellow and the grey metal are considered a store of wealth for investors. They are often used as a means of preserving wealth during times of financial and political uncertainty and usually do well when other asset classes struggle. Factors such as the forthcoming U.S. presidential election and geopolitical tensions enhance both metals’ attractiveness to investors.

The ultra-popular SPDR Gold Trust ETF (GLD - Free Report) , which tracks the price of gold bullion measured in U.S. dollars, has gained 14.3% so far this year. In comparison, iShares Silver Trust (SLV - Free Report) , the ultra-popular silver ETF, has outperformed its gold cousin, climbing 29.1% in the same timeframe (read: 10 Most Heavily Traded ETFs of Q2). 

The other two silver ETFs — abrdn Physical Silver Shares ETF (SIVR) and Sprott Physical Silver Trust (PSLV - Free Report) — have also outperformed GLD, having gained 29.2% and 29.8%, respectively, this year.

Silver Continues to Have an Edge

Silver has an edge over gold, as the grey metal is used in a number of key industrial applications. As the global economy is improving, industrial and manufacturing demand is picking up, driving silver prices. The grey metal is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers. 

The silver market is heading for the fourth year of deficit, with this year’s shortage seen as the second biggest ever. Per the Silver Institute industry association, the global silver deficit is expected to rise 17% to 215.3 million troy ounces in 2024, driven by robust industrial demand.

The Silver Institute predicts global demand to reach 1.2 billion ounces this year, which would mark the second-highest level on record, given the continued strength in industrial end-uses and recovery in jewelry and silverware demand. The institute anticipates a 9% increase in demand for silverware and a 6% rise in jewelry demand this year. A projected recovery in consumer electronics, as well as increased demand in India, will also provide a boost to the silver market (read: Tap the Rally in Commodities With These ETF Winners).

Further, the global push for green energy, increasing demand in areas like 5G, the photovoltaics and automotive industries, 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 largely used for manufacturing solar panels and electric vehicles and will play a key role in the shift to 5G wireless network technology.

We have detailed the abovementioned ETFs here:

iShares Silver Trust (SLV - Free Report)  

iShares Silver Trust offers exposure to the day-to-day movement of the price of silver bullion. It is an ultra-popular silver ETF with an AUM of $13.5 billion and a heavy volume of 23.4 million shares a day. It charges 50 bps in fees per year from investors (read: 5 Top-Performing ETFs of Q2).

abrdn Physical Silver Shares ETF (SIVR) 

abrdn Physical Silver Shares ETF has an AUM of $1.4 billion and trades in a good volume of around 1 million shares per day on average. It tracks the performance of the price of silver less the Trust expenses. Its expense ratio is 0.30%.

Sprott Physical Silver Trust (PSLV - Free Report)

Sprott Physical Silver Trust is a closed-end trust that invests in unencumbered and fully allocated London Good Delivery silver bars. It charges 60 bps in annual fees. 

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SPDR Gold Shares (GLD) - free report >>

iShares Silver Trust (SLV) - free report >>

Sprott Physical Silver Trust (PSLV) - free report >>

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