Silver hit a new two-year high last week on renewed expectations of U.S. interest rate cuts anytime soon. The grey metal has climbed above the milestone of $27 an ounce for the first time in 2024. Additionally, rising geo-political risk, increased industrial demand and uncertainties ahead of general elections in major economies added to the strength (read: Silver ETFs Outshining Gold).
In fact, metal miners are the biggest beneficiaries of a surge in silver price as it acts as a leveraged play on underlying metal prices and thus tends to experience more gains than its bullion cousins in a rising metal market. Silver ETFs have been on a surge, gaining in double-digits last week. These include iShares MSCI Global Silver and Metals Miners ETF SLVP, Global X Silver Miners ETF SIL, and ETFMG Prime Junior Silver ETF SILJ.
Inside The Surge
A lower interest rate environment raises demand for silver as the precious metals do not pay any interest, making them less appealing compared to alternative investments like bonds.
As the global economy is improving, industrial and manufacturing demand is picking up, driving silver prices. The white 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 Institute predicts 2024 to be a banner year for the metal, with prices potentially hitting a decade-high. Global demand is expected to reach 1.2 billion ounces this year, which would mark the second-highest level on record, given the continued strength of industrial end-uses, and a 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, with India expected to drive the jump in jewelry purchases. A projected recovery in consumer electronics will also provide a boost to thesilver market(read: Time to Buy India ETFs?).
Further, the global push for green energy, increasing demand in areas like 5G, a rebound in global computer shipments, the photovoltaics (PV) and automotive industries, 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 discussed the abovementioned ETFs here:
iShares MSCI Global Silver and Metals Miners ETF (SLVP) – Up 15.5%
iShares MSCI Global Silver and Metals Miners ETF follows the MSCI ACWI Select Silver Miners Investable Market Index, providing investors exposure to companies that derive the majority of revenues from silver exploration or metals mining. It holds 34 stocks in its basket, with Canadian firms making up the lion’s share at 67.1%, while the United States and Mexico round off the next spot with double-digit exposure (read: Best Stocks of the Top-Performing ETF of the Past Month).
iShares MSCI Global Silver and Metals Miners ETF has AUM of $193.9 million and an average daily volume of about 100,000 shares. It charges 39 bps in annual fees.
Global X Silver Miners ETF (SIL) – Up 13.1%
Global X Silver Miners ETF provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 32 stocks in its basket with double-digit concentration on the top two firms.
Global X Silver Miners ETF has managed assets worth $980 million and trades in a good volume of about 367,000 shares a day. It charges 65 bps in annual fees.
ETFMG Prime Junior Silver ETF (SILJ) – Up 12.1%
ETFMG Prime Junior Silver ETF provides direct exposure to the small-cap silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 50 stocks in its basket, with Canadian firms taking the lion’s share at 67.3%, while the United States takes 10.5% exposure.
ETFMG Prime Junior Silver ETF has managed assets worth $802.8 million and trades in a good volume of nearly 1.5 million shares a day. It charges 69 bps in annual fees (see: all the Materials ETFs here).
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