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Why Silver ETFs May Outshine Gold

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Renewed expectations of higher inflation amid some strength in the U.S. economy and the resultant rise in interest rates may add to the gains in the beleaguered greenback in the short term. This may not be a great situation for gold investing but investors can pile up on silver in any case.

The white metal has seen held steady in recent trading. Traders in the gold to silver price ratios have shifted to silver and many physical market players swarmed in silver. Silver bullion ETF iShares Silver Trust (SLV - Free Report) was up 5.3% in the last one month and 4.8% in the last one week (as of Apr 18, 2018). The gains were in contrast to the 1.3% one-month rise in gold bullion ETF SPDR Gold Trust (GLD - Free Report) . GLD was up only 0.8% in the last one week.

There are high chances that silver will maintain the lead over gold in the near term. Let’s tell you why (read: Why These Aluminum ETFs & Stocks Jumped on Monday).

Uptick in Global Manufacturing Activity

Silver has high usage in industrial activities with about 50% of total demand coming from industrial applications. With most of key economies coming up with manufacturing data in the growth zone lately, silver definitely has some reasons to cheer for.

The IHS Markit U.S. Manufacturing PMI was 55.6 in March 2018, above February's 55.3. The reading marked the strongest clip of growth in the manufacturing sector since March 2015. Chinese and Japanese manufacturing PMI are also in the expansion territory.

Possibilities of Faster Fed Hike

Investors should note that if the U.S. economy continues to come up with sturdy readings, the dollar will strengthen and may put pressure on broad-based commodities along with gold. But since silver has considerable usage in industrial activities, a recovering economy may continue to push silver ETFs higher.

Are Silver Prices Undervalued?

According to Goldmoney’s VP and lead researcher Stefan Wieler,“silver prices are trading almost 25% below the values predicted by our price model. This is the largest downside deviation we have seen in over 25 years,”.

Massive short selling in the futures market led to this mismatch, according to the report. However, the trend should reverse soon, as a dip in net selling would push up silver prices higher. Another market analyst believes that “silver has been missing out on a lot of the positive price action lately.”

Play Silver Rally With These ETFs

Needless to say, silver ETFs are clearly outperforming gold from both a five-day and a one-month look. So, investors can play this bullish trend with the silver ETFs like SLV, ETFS Physical Silver Shares (SIVR - Free Report) and PowerShares DB Silver Fund (see all Precious Metals ETFs here).

Leveraged silver exchange-traded products like VelocityShares 3x Long Silver ETN , and ProShares Ultra Silver (AGQ - Free Report) gained about 9.8% and 6.6%, respectively, in the last one month, thus making great bets as the fundamentals remain bullish.

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