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Safe-Haven Demand Bolsters Silver ETFs

This article was originally published on ETFTrends.com.

Silver ETFs shined on Tuesday as a round of risk-off selling sent investors to the relative safety of precious metals.

Among the best performing non-leveraged ETFs of Tuesday, the ETFMG Junior Silver Miners ETF (SILJ) advanced 4.3% and the Global X Silvers Miners ETF (SIL) increased 3.0%.

Meanwhile, the iShares Silver Trust (NYSEArca: SLV) was 4.4% higher as Comex silver futures rose 4.9% to $19.25 per ounce.

Silver strengthened on a safe-haven boost Tuesday after fresh economic data revealed U.S. manufacturing slowed to the weakest pace since 2016, fueling concerns of an impending recession as a result of a prolonged U.S.-China trade war that has dragged on the global economy.

“People are finally starting to believe that we are in a bull market in [precious] metals,” James Hatzigiannis, senior strategist at Long Leaf Trading Group, told MarketWatch. “Silver is always known as a laggard to gold, and now you are seeing people getting into silver, and believing it’s a bull market.”

Poor-Mans Gold

Many now see silver as the cheaper poor-mans gold, and despite the recent strength in the silver markets, silver remains lagging behind the gains in the gold market.

“Silver still has a lot of catch-up as the gold-silver ratio is still very high”, said Drew Rathgeber, futures broker at Daniels Trading, told MarketWatch. “Silver still has a lot of upside potential."

Back in January 2014, the gold-to-silver ratio was at nearly 67 when gold was at $1,283 and silver at $19.60. If the ratio was at the same level today, silver would “be easily $20 plus per ounce,” Rathgeber added.

Related: Why Shining Silver ETFs Can Keep Soaring 

Overall, fundamentals may continue to support silver and the broader precious metals market. We are facing an environment of negative interest rates in overseas markets with central banks weakening their paper currencies in a bid to support local economies. Central banks are also amassing gold. Meanwhile, the global economy has slowed and a protracted trade war fuels an ongoing uncertainty.

Silver “was underappreciated for most of 2019 as gold accelerated past $1,400 towards its current level," Jeff Wright, executive vice president of GoldMining Inc., told MarketWatch. As investors have begun “discussing gold getting ahead of economic news and maybe a reduced safe-haven interest in gold, silver has begun to catch up.”

For more information on the precious metals market, visit our precious metals category.

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