Silver fell to a five-year low around $14 an ounce earlier this year, but now seems to be finding its feet. This week it reached $16, its highest in more than three months. Silver is a monetary metal, and so has a tendency to follow the gold market – but with more volatility: when it jumps it tends to outperform gold, while its lows dip even lower. But silver is also far more closely tied into industry than gold. It’s a core material in electronics, optics and biotech, with around 50% of demand stemming from industry. So while gold is a pure monetary play, silver is less so.
Analysts are increasingly upbeat on the metal. It’s partly due to the Federal Reserve’s apparent reluctance to raise US interest rates, which has boosted demand for investments with no yield, such as gold and silver, and stymied the rise in the US dollar, which is good news for assets priced in the currency.
Sentiment towards industrial commodities is improving too, and better news from China should continue this trend in the next few months, argues Morgan Stanley. This suggests silver could keep going for now. The ETFS Physical Silver ETF (LSE: PHAG) is a simple way to invest. Just remember, this is a particularly volatile metal – be prepared for a bumpy ride.