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Silver ETFs or Gold: Which Metal to Shine More Ahead?

Sanghamitra Saha

Precious metals like gold and silver have been rallying hard lately. This is because investors’ drive for safe-haven investments amid growing risks emanated from rising virus cases, collapse in real bond yields, fear of prolonged global recession and the ongoing uncertainty surrounding the U.S.-China relation.

Additionally, extra-loose monetary policies across the globe including the United States added to the metals’ strength. The Fed cut rates to zero and launched an unlimited QE to contain the coronavirus-led economic slump. Lower U.S. rates should weigh on the dollar against a basket of currencies, raising the precious metals’ attractiveness as these do not pay interest like fixed-income assets.

With this, gold is now sitting at an all-time high while silver prices are hovering around a seven-year high. SPDR Gold Shares GLD has added more than 15% past month while iShares Silver Trust (SLV) has jumped more than 50%. Now what remains to be seen is which metal has more upside ahead.

What to Buy Ahead? Gold or Silver

Along with some analysts, we too believe that “gold has run up a little bit higher. It’s hitting all-time numbers whereas silver is still way off its all-time high.” So, the poor man’s gold has more room to run than the yellow metal.

Moreover, the operating backdrop is more favorable for silver. Silver has high usage in industrial activities with about 50% of total demand coming from industrial applications. The JP Morgan Global Manufacturing purchasing managers index rose to a six-month high of 50.3 in July from 47.9 in June.

Manufacturing activity in China expanded at the quickest clip in nearly a decade as domestic demand improved. Meanwhile, U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July as orders increased despite a resurgence in new COVID-19 infections (read: U.S. Manufacturing at a 1-1/2 Year High: 5 Winning ETF Areas).

Growth in the global solar PV industry, a likely rebound in global computer shipments, as well as new sources of demand for sensors used in IoT are providing a boost to silver demand. A raft of global stimulus, including the latest announcement from the European commission of borrowing 750 billion euros, should work wonders for this white metal (read: Bet on Europe ETFs After a Key Pandemic Deal).

The recent emergence and faster rollout of 5G globally is another positive for silver. The electronic components that enable 5G technology depend on silver greatly. Silver’s role in the electronic applications used in 5G is forecast to rise significantly to approximately 16 Moz by 2025 and as much as 23 Moz by 2030, which would mark a 206% rise from the current level, per a report from the Silver Institute.

If Americans receive a satisfactory level of unemployment aid in the HEALS Act, good progress in COVID-19 vaccine and treatment, and upbeat corporate earnings, we can expect the gains in silver to beat out gold in the coming days.

ETFs in Focus

Apart from the largest ETF SLV, investors can also bet on the likes of Aberdeen Standard Physical Silver Shares ETF SIVR, Invesco DB Silver Fund DBS and ProShares Ultra Silver (AGQ) to realize gains in silver.

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SPDR Gold Shares (GLD): ETF Research Reports
 
iShares Silver Trust (SLV): ETF Research Reports
 
Invesco DB Silver ETF (DBS): ETF Research Reports
 
ProShares Ultra Silver (AGQ): ETF Research Reports
 
Aberdeen Standard Physical Silver Shares ETF (SIVR): ETF Research Reports
 
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Zacks Investment Research
 
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