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Silver Remains Bearish Owing to a Global Market Slump

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Oct. 1 2015, Published 12:57 p.m. ET

Retreating silver prices

Silver, like gold, is a preferred way to diversify a portfolio. Silver investments most likely correlate with gold counterparts. Currently trading at a six-year low, silver is set to end the 2015 year with downside returns. It may be the fourth down year in a row. Silver futures on COMEX, a commodity division of the New York Mercantile Exchange, lost 3.8% on its most actively traded contract. It closed at $14.54 with a day’s low of $14.47 per ounce. Silver has seen a year-to-date, or YTD loss, of 6.26%.

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Miner carnage

Silver-backed ETFs that have fallen due to slipping silver prices include the Global X Silver Miners ETF (SIL) and the iShares Silver Trust (SLV). These ETFs have fallen by ~6% and 3.8%, respectively.

With the US economy stabilizing and inflation reaching the target 2% mark and lower unemployment, the Federal Reserve is expected to raise interest rates at the end of the year. Higher interest rates increase the yield on interest-bearing assets like bonds, which decreases the appeal of precious metals as silver, gold, and platinum. This could put additional short-term pressure on silver prices in 2015.

However, rising interest rates could be an indicator of economic growth that may boost silver prices in the coming year. Mining companies that may shine owing to improved silver prices include Pan American Silver (PAAS), Hecla Mining Company (HL), Silver Wheaton (SLW), and Coeur Mining (CDE). These four stocks’ share prices fell on Monday as silver retreated. PAAS, HL, SLW, and CDE gave up ~4.8%, 6.3%, 5.3%, and 6.8%, respectively. These stocks contribute ~8.3% to the VanEck Vectors Gold Miners ETF (GDX).

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