As we reach the end of the first quarter, the commodity world has had plenty to chew on in 2015. Though various hard assets have jostled back and forth over the past three months, silver has come away as the best performing commodity on the year.
Silver is often overshadowed by the movements of gold, which is easily the most popular precious metal. But silver is still among the most sought after commodities, as it carries some of the safe haven appeal that is attached to precious metals, while also serving a laundry list of industrial purposes.
Silver Takes Charge in 2015
The chart below displays silver’s performance on the year as represented by the iShares Silver Trust (SLV).
After starting the year off on a hot streak, equities stabilized and SLV lost some ground. However, silver prices began to pick back up in recent weeks, managing to jump more than 7% on the year.
Part of the renewed life for SLV is investor speculation that the Fed will be raising rates sometime this year. Though it seems like Yellen and company seem to push off the inevitable for as long as possible, many speculate that 2015 is the year that interest rates will finally jump. When that happens (whether it be this year or somewhere down the line) silver and gold prices will spike, as investors will flock to these safe havens in fear of a market correction
Silver, along with almost every commodity, has gotten relief in recent weeks as the U.S. dollar seems to finally be cooling off. A falling dollar is a bullish tailwind for most commodities, including silver. The greenback had been rallying for the better part of a year before finally showing signs of slipping in mid-March [see also 25 Ways To Invest In Silver].
Still, it seems that investors have not been hopping on the trend for the white metal. SLV has had investing outflows of about $50 million this year. Technically, that number can be influenced by short positions, but given that the inverse silver ETN (ZSL) has also had outflows, it seems more likely that SLV is losing longs.
The Bottom Line: Looking Ahead for Silver
There are three big factors to consider when looking at silver’s short-term outlook: the performance of the dollar, the Fed’s rate decision, and the performance of the broad economy. The latter two are relatively connected, as a decision to raise rates will likely sink broad indexes in the short term. A weakening dollar will be bullish for silver and vice versa. These three factors could play out in any sort of manner, so it is important that silver investors keep their eye closely on them and how they progress.
Disclosure: No positions at time of writing.