Gold and silver prices are trading lower for the fourth consecutive day. A strengthened U.S. Dollar and hopes for an economic recovery are part of the reasons why investors’ interest in the precious metals has cooled down.
As gold futures hit a two-week low, the U.S. dollar index hit a two-month high overnight. In addition, the U.S. stock market bulls have made a strong recovery this week with indexes trading near their recent record highs—bad news for the safe-haven metals. April gold futures were last down $15.30 at $1,819.60 and March Comex silver was last down $0.244 at $26.635 an ounce.
Amid this new downfall, an interesting trend has emerged. While both gold and silver can offer protection for investors who are worried about currency debasement, silver has a hidden advantage. What silver has that gold doesn’t have is a wider industry application and, more specifically, use in solar panels. Silver is used in solar cells, given its strength as a cost-effective conductor of heat and electricity.
Silver’s characteristics make it indispensable for many industrial products, with industrial applications accounting for roughly 60% of the metal’s global consumption. Now that many economies are starting to show signs of recovery, this translates to growing industrial activity. It will, in turn, continue to sustain silver demand. China remains a major driver in the global silver demand, fuelled by sustained industrial demand and silver mining activity.
Additionally, the ongoing revolution in green technologies, aided by the exponential growth of new energy vehicles and investment in solar photovoltaic energy, will be a major catalyst. The fight against climate change and efforts to curb pollution are seeing governments worldwide provide financial incentives and imposing regulations that favour the development of electric and hybrid vehicles.
The price of silver moves more with inflation and the U.S. dollar as opposed to gold, since it has more industrial purposes. As inflation rises 1% year over year on average, silver gains 17.4% on average, while gold gains only 6.3% on average.
One way to add exposure to silver at this time is through investment in mining stocks. However, as silver miners are still combating the effects of lockdown disruptions to their production and supply chain, some of the best silver shares to buy include silver ETFs. The iShares Silver Trust (ticker: SLV), for example, is benchmarked to the price of silver. The ETF has risen nearly 48% in the past year, while the three-year return is 2.2% and the five-year return is 2.07% with a fee of 0.5%.