Here’s How To Play Silver’s Renewed Rally (SLV)

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May 23, 2017 6:15am NYSE:SLV


From Mike Burnick: Last week, volatility returned to the markets and the prime catalyst – of course – was the growing political concerns in Washington, plus a new political scandal in Brazil.

That’s all good news for precious metals.

Let’s look at silver – which saw its price rebound sharply, after falling about 14% – now trading higher in seven of the last eight trading days. Even after the selloff, silver is still trading up about 5% for the year from last year’s closing price of $15.936.

The fact is last year was a turning point for silver prices on an annual-average basis, with prices up 9.3% to $17.14/oz. This marked the first increase since 2011 for silver.

And I expect this trend to continue.

Take a look below at The Edelson Institute cycle forecast for silver, which is looking very bullish heading into the summer months.

As you can see from our cycle forecast, the decline in April and early May means that silver has likely bottomed. And from a technical standpoint, I am eyeing $17.05 as the first level of resistance on this current upswing: A break above this level would be very bullish.

Plus, from a fundamental perspective, things are looking bullish for silver as well. Speculators in silver futures and options aggressively liquidated their net-long positions recently, cutting the long positioning by 41% from a record high of 190,000 contracts down to 71,000 contracts. This move sets silver up for its next leg higher.

Also, during the later April-early May downturn, total open interest plunged 19.6%. That removes the speculative froth that was building in silver futures, another bullish sign.

The recent silver production numbers released by The Silver Institute’s World Silver Survey 2017 were also positive: Global silver production dropped last year for the first time since 2002. Overall, total silver supply decreased by 32.6 million ounces in 2016.

Don’t forget that the summer months can be quite volatile for precious metals, so caution is warranted. But we should see the silver market continue to grind higher while using further pullbacks as an opportunity to add to our silver holdings.

Here’s How to Play It

On the next pullback, the simplest way to add silver exposure to your portfolio is by using an ETF, like the iShares Silver Trust (SLV). But if you really want to ramp up your exposure, you can go with a leveraged ETF, like the VelocityShares 3X Long Silver ETN (USLV), which is triple levered – or ProShares Ultra Silver (AGQ), which gives you double the leverage.

Another way to play it is through silver mining stocks, which should rise right along with silver prices.

Any which way you decide to play it, always be aware of the risks involved with each type of investment product and only invest if you are comfortable with those risks.

The iShares Silver Trust ETF (NYSE:SLV) was unchanged in premarket trading Tuesday. Year-to-date, SLV has gained 7.41%, versus a 7.15% rise in the benchmark S&P 500 index during the same period.

SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #12 of 33 ETFs in the Precious Metals ETFs category.

This article is brought to you courtesy of The Edelson Institute.

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