In my previous article, I discussed the breakout of the iShares Silver Trust ETF (SLV) and anticipated higher prices based on technical analysis. Since then, SLV prices surged to nearly $30 but then pulled back to $24.5 amid recent market volatility. Despite this pullback, I maintain my BUY rating on SLV and believe that the dip will be short-lived.
Now, let’s delve into the fundamental drivers behind SLV’s price movements. First, let’s talk about the supply-demand deficit. The global silver deficit is expected to widen in 2024, reaching 215.3 million ounces. This deficit is driven by increased demand from various industries like electronics, electric vehicles, and solar panels. Additionally, the expansion of renewable energy and electric vehicles will continue to drive demand for silver in the future.
Another key driver of SLV’s price is the outlook for interest rate cuts. The probability of interest rate cuts has increased significantly, with the market expecting at least two cuts by the end of 2024. Lower interest rates typically lead to a weaker US dollar, making precious metals like silver more attractive to investors. Additionally, lower interest rates make non-yielding assets like SLV more appealing compared to bonds.
While SLV offers strong upside potential, it also comes with risks. The fund is susceptible to price fluctuations in the underlying commodity, and investors should be aware of the potential counterfeit risk associated with physical silver holdings. Additionally, the higher expense ratio of SLV compared to its peers is something to consider when making investment decisions.
In conclusion, despite the risks, I believe that SLV presents a compelling investment opportunity with strong fundamental drivers supporting its price. The persisting supply-demand deficit and the likelihood of interest rate cuts make SLV an attractive asset for investors looking to diversify their portfolio. Consider joining Envision Early Retirement for expert insights and strategies to navigate the current market conditions and make informed investment decisions. With our proven method, you can potentially outperform the market with lower drawdowns. Join us for a 100% risk-free trial and see how we can help you achieve your financial goals without expensive lessons from the market itself.
