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B.MO Capital Markets noted that the Federal Reserve’s recent aggressive stance on the economic recovery could hold silver prices down through the rest of 2021.
An improving economy is causing the central bank to view 2022 as the year to raise interest rates. The Fed plans to reduce its stimulus measures as the economy continues to recover from the effects of the ongoing pandemic.
“As inflation drifts down value chains, various central banks have either begun to abandon expansionary monetary policies, or at least to take this path news. “While negative real returns should prevent a rapid shift of macro assets away from commodities, caution is warranted with precious metals until the rejuvenation has taken place.”
However, that shouldn’t deter investors from continuing to play with ETFs like silver Global X Silver Miners ETF (SIL). SIL strives to deliver investment results that are generally in line with the price and return performance of the Solactive Global Silver Miners Total Return Index before fees and expenses.
If consumer prices start to rise, silver can potentially serve as an ideal inflation hedge despite the current price weakness. This only opens up opportunities for investors to buy silver when there is a dip.
Overall, SIL offers investors:
- Targeted engagement: SIL is a targeted game in silver mining.
- ETF Efficiency: In a single trade, SIL provides efficient access to a basket of companies involved in silver mining.
Silver still has long-term potential
In addition, the BMO analysts still see silver as a viable option in the long term. The precious metal can be used to diversify a portfolio while protecting against inflation.
“We expect that positive investor sentiment regarding the longer-term industrial uses of silver, particularly in connection with the energy transition, will support the price in the short term,” said the analysts.
In addition, compared to its more expensive brethren, gold, silver has a higher utility. This gives silver more flexibility than just serving as a store of value or a safe haven metal.
“Since silver has a very high conductivity, it is used for many technological applications in solar energy and the electric automotive industry,” says Giancarlo Camerana, strategic advisor at QORE Switzerland, a precious metals and investment advisory company.
More news, information and strategies can be found in the thematic investment channel.
Read more at ETFtrends.com.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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