This year has been pretty terrible for the precious metals—gold and silver in particular—thanks mainly to ‘tapering’ fears, lower demand from India and China and absence of inflationary concerns. However silver prices have begun to surge in the past few weeks on renewed worldwide demand from the industrial sector.
Silver is now around trading around $23 per ounce, up about 26% from its three-year lows reached in late June. The uptrend has mainly been a result of recent improvement in the global economic outlook. (Read: Gold Mining ETF Investing 101)
Unlike gold, silver is used in wide range of industrial applications and its price therefore is driven by the level of global economic activity. About 50% of the metal’s total demand comes from industrial applications whereas demand from jewelry/silverware/coins & medals manufacturers accounts for ~30% of the demand.
Recent pick up in the global manufacturing activity—particularly in the US, China and Europe—has been pretty supportive for the shiny white metal. The US manufacturing activity has been quite upbeat of late, as manufacturers have been expanding production and adding jobs in response to the increased demand.
Reports from China, the world’s top metals consumer, have suggested that economic growth is now picking up after slowing down in the first half of the year. The euro zone finally emerged out of its six-quarter long recession during the second quarter of this year. If the global economy can stay on its modest recovery path, silver will continue to find support. (Read:Copper ETFs surge on solid china trade data)
Thanks to improved investor interest, popular silver ETF SLV has added about $190 million in assets in the past one month, whereas in contrast the gold ETF GLD has continued to lose assets, with its AUM down by $860 million during the same period.