Silver prices rallied and topped $34 per ounce — the highest level since October 2012. Falling interest rates and safe-haven demand are driving the price higher. Additionally, increased industrial demand and supply deficit conditions are providing silver an edge over gold. The white metal is up 35% so far this year, outperforming gains of 19% for the S&P 500 and 26% for gold (read: Gold Tops 2700: ETFs to Tap the Metal's Rally).
Silver miners also spiked, as they are the biggest beneficiaries of a surge in silver prices. These act as leveraged plays on underlying metal prices and thus tend to experience more gains than their bullion cousins in a rising metal market.
That said, we have highlighted five ETFs that have been leading the space this year. These include iShares MSCI Global Silver and Metals Miners ETF SLVP, ETFMG Prime Junior Silver ETF SILJ, Global X Silver Miners ETF SIL, abrdn Physical Silver Shares ETF SIVR, and iShares Silver Trust SLV. The trend is likely to continue, at least for the rest of the year.
Falling Interest Rates
Central banks around the world, including the Federal Reserve and European Central Bank (ECB), have been cutting interest rates to combat slow economic growth.
After holding the rates at a 23-year high for 14 consecutive months since July 2023, the Fed kicked off the new rate cycle era by initiating a 50-basis point cut in interest rates last month. This marked the first rate cut since 2020. The central bank projects two more rate cuts of 50 bps in its final two meetings this year, due in November and December. It also indicates another 100-bps rate cut next year and a 50-bps cut in 2026, which means four rate cuts in 2025 and two in 2026 (read: Fed Initiates Rate Cuts: Top-Ranked Growth ETFs to Buy).
Meanwhile, the ECB cut interest rate for the third time this year as inflation risks in the European Union subsided faster than expected. The central bank lowered the deposit rate by a further 25 bps at its October meeting.
A lower interest rate environment raises demand for silver, as precious metals do not pay interest, making them appealing compared to alternative investments like bonds.
Store of Wealth
Silver is often used to preserve wealth during times of financial and political uncertainty and usually does well when other asset classes struggle. A tight race between Kamala Harris and Donald Trump in next month's elections, Middle East tensions and the ongoing Russia-Ukraine war enhance the metal’s attractiveness among investors.
Edge Over Gold
The outperformance relative to gold came from the view that silver is undervalued, less crowded, and supported by multifaceted, versatile demand applications. 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.
Additionally, 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.
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 will also provide a boost to the silver market.
We have discussed the abovementioned ETFs here:
iShares MSCI Global Silver and Metals Miners ETF (SLVP) – Up 46.4%
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 29 stocks in its basket, with Canadian firms making up the lion’s share at 68.4%, while the United States and Mexico round off the next spots. iShares MSCI Global Silver and Metals Miners ETF has AUM of $274.4 million and an average daily volume of about 136,000 shares. It charges 39 bps in annual fees.
ETFMG Prime Junior Silver ETF (SILJ) – Up 44.9%
ETFMG Prime Junior Silver ETF is the first ETF to target small-cap silver miners. It provides direct exposure to the small-cap silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. ETFMG Prime Junior Silver ETF holds 52 stocks in its basket, with Canadian firms taking the lion’s share at 58%, while the United States takes 17% exposure. It has managed assets worth $1.1 billion and trades in a good volume of nearly 2 million shares a day. It charges 69 bps in annual fees (see: all the Materials ETFs here).
Global X Silver Miners ETF (SIL) – Up 41.4%
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 34 stocks in its basket with double-digit concentration on the top two firms. Global X Silver Miners ETF has managed assets worth $1.3 billion and trades in a good volume of about 577,000 shares a day. It charges 65 bps in annual fees.
abrdn Physical Silver Shares ETF (SIVR) – Up 41%
abrdn Physical Silver Shares ETF tracks the performance of the price of silver less the Trust expenses. It has an AUM of $1.5 billion and trades in a good volume of around 752,000 shares per day on average. SIVR has an expense ratio of 0.30%.
iShares Silver Trust (SLV) – Up 40.7%
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 $15 billion and a heavy volume of 19 million shares a day. It charges 50 bps in fees per year from investors.
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