Silver Down 46% From Its Peak to $66 an Ounce. Is This Top Silver ETF Still a Buy?
On Jan. 29, the price of silver hit an all-time high of $121.67 per troy ounce, quadrupling from $30.38 per ounce a year ago. Meanwhile, strong industrial demand, intense investor demand, and production constraints all pushed up the price.
But since reaching that peak, it has fallen 46% to $66 per ounce. Let’s see why it’s reversed — and when it’s the right time to buy silver with iShares Silver Trust ETF (NYSEMKT: SLV).
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Why is the price of silver falling again?
Three catalysts fueled silver’s rally last year. First, market demand for silver to manufacture solar panels, electric vehicles, consumer electronics, and data centers exceeds global supply. The explosive growth of the cloud and AI markets was a major factor.
Second, falling metal grades, rising production costs, and stricter environmental regulations are increasing that pressure by preventing silver miners from producing enough silver. Finally, expectations of further interest rate cuts — typically weakening the US dollar — have led many investors to accumulate silver and gold as safe-haven assets.
However, three challenges ended that meeting. First, more than half of the world’s silver demand came from industrial producers. Inflation and high interest rates eventually forced those companies to engage in spending.
Second, silver became more expensive at an all-time high — many companies switched to processes that used less silver or cheaper metals like copper. Gold is not exposed to those major challenges, as it is not as widely used in industry as silver.
Finally, the outbreak of war in Iran in late February, which raised oil prices and fueled inflation, fueled inflationary fears. A rise in interest rates will strengthen the US dollar and weaken silver, gold, and other US dollar-denominated assets.
Is it the right time to buy SLV?
The iShares Silver Trust ETF, with $32.5 billion in assets, is the world’s largest silver ETF and is the easiest way to invest in the precious metal. But the ETF also charges an annual sponsor fee of 0.50%, which is paid by selling some of its silver, so each share will represent less silver over time, reducing your long-term gains. That’s why it has only increased 231% in the last 10 years, while the price of silver has increased 351%.
