It’s probably time to stock up on silver, one of the best performing investments so far this year.
Concerns about global economic slowness have prompted risk-averse investors to seek safe haven in the devil metal and its peers, staying away from the highly volatile stock market.
Recent data compiled by Bloomberg shows that holdings in silver-backed exchange-traded products (ETPs) jumped 845.6 metric tons in March, heading for the biggest monthly increase since August 2013. (Source: “Silver Fund Holdings Surge Most Since 2013 as Price Rally Fades,” Newsmax, March 30, 2016.)
Investors are worried about the economic slowdown in China. The world’s second-largest economy is expanding at a growth rate below seven percent, compared to the above 10% rate over the past 30 years.
Investors are also still concerned over the oil price, which has just recovered a little compared to its 2014 peak. West Texas Intermediate was trading at $38.77 on Thursday.
The recent trend by world central banks toward adopting zero or negative interest rates has only added one more reason for investors to resort to silver.
The silver price has rallied 12% so far this year, lagging behind gold’s 17% gain, which makes silver more alluring to retail investors speculating that the Federal Reserve might be slow in hiking interest rates this year.
In mid-March, the Fed decided to leave its benchmark interest rate between 0.25% and 0.50%. It also projected only two rate hikes this year, down from the four rate hikes it projected in December, when it lifted rates for the first time in more than nine years.
And this week, Fed Chair Janet Yellen said the U.S. central bank will be careful while raising rates, an advantage to zero-yielding silver and the rest of precious metals. Retail investors are now eyeing more clues about the timing of U.S. interest-rate hikes.
CNBC expects the Fed’s June meeting to be the more likely time for the next rate increase, because Yellen is already set to hold a news briefing after the release of the policy statement. No news conference is scheduled for April and no meeting is scheduled for May. (Source: “Fed’s Evans: April rate hike would be surprising,” CNBC, March 30, 2016.)
The silver price is currently trading at $15.395 a troy ounce, 13.4% higher than its 52-week low of $13.660, recorded on December 14. Holdings in ETPs rose to 19,486 tons as of Monday, the highest since April, according to Bloomberg.
iShares Silver Trust (ETF) (NYSEARCA:SLV) was trading at $14.67 on Thursday, down from its April 2011 peak of $46.90.