iShares Silver Trust ETF: A Trading Play

Sep. 23, 2021 4:28 PM ETiShares Silver Trust ETF (SLV)16 Comments


  • In the decade ending October 2020, i.e., in the pre-COVID-19 era, the iShares Silver Trust ETF delivered flat returns, disappointing its loyal investors.
  • The ETF spiked in February 2021 because Redditors decided to gang up and squeeze silver shorts. However, as of now, the ETF is back to its normal “flat” times.
  • The Silver Institute estimates that going forward supply will keep up with the demand while the World Bank estimates that silver’s price will remain in flat terrain until 2035.
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Silver bar, ingots and coins on financial report. Growth of silver on stock market concept.
Bet_Noire/iStock via Getty Images

Behind every silver lining, there's a cloud. – Glenn Gould

The iShares Silver Trust ETF (NYSEARCA:SLV) invests in physical silver and offers exposure to the commodity’s daily prices – at an expense ratio of 0.50%. As of September 22, 2021, the ETF held about 547 million ounces of silver in trust.

SLV has had an eventful year lately. In February 2021, Redditors ganged up to squeeze silver shorters, an event that resulted in the price of the commodity zooming to $30/oz. Well, that event has passed and we are back to normal times. Aside from this spike, which largely helped traders and some investors rake in the cash, SLV has had an uneventful year. In the last 12 months, the ETF has depreciated by 9.5%, which is bad news for its loyal investors.

SLV’s prospects depend on how the demand and supply for the commodity will pan out going forward. Let us check if the ETF is investable.

Silver Demand and Supply Scenario

SLV ETF - Silver demand and supply scenario

Image Source: Silver Institute

As per the Silver Institute, silver’s demand fell by 10% and its supply too fell by 4% in 2020.

In 2021, the Institute estimates that the commodity’s demand will rise by 15% and supply too will rise by 4%. The demand is likely to be driven by jewelry, silverware, and physical investment. Plus, the use of silver in solar power and EVs too will help increase the demand.

SLV - World Bank Silver Price Forecast

Image Source:

The World Bank estimates that after spiking in 2021, silver’s price will stabilize and remain restricted in a narrow band during the period 2022–2035.

The Silver Institute estimates that silver production from mining will remain strong in the long term. It expects that Pan American Silver’s Escobal mine will restart production, an event that will dramatically increase the global output.

SLV long-term return

Image Source: My Tweet/The Lead-Lag Report

In the last decade in the pre-COVID-19 era, SLV remained in flat territory and ended up disappointing its loyal investors. The action in precious metals picked up after COVID-19 smashed into the economy. However, current economic developments, especially in the developed economies, suggest that global economies are crawling back to normal times.

Therefore, I estimate that SLV’s long-term price momentum is likely to remain flat going forward unless a black swan lands up.

Government Debt & Redditors: The Jokers in the Pack

Government Debt & Redditors: The Jokers in the Pack

Image Source: IMF

As per the IMF, the gross government debt of advanced economies will rise until the end of 2021, and then remain static until 2026. If the economic recovery does not keep pace with the ballooned debt, investors may start hoarding gold and silver.

Also, Redditors can gang up when short positions develop in the commodity and squeeze the shorters.

These two events can be wildcards in an otherwise predictable price momentum of silver.

Summing Up

Based on SLV’s price momentum in the pre-COVID-19 era, the Silver Institute’s demand and supply forecast, and the World Bank’s price forecast, I am not bullish on SLV as a medium- to long-term investment.

However, SLV does make the cut as a trading play or a short-term investment at times when any of the following events occur:

  1. Redditors start chatting about trapping silver shorters.
  2. Geopolitical tensions rise.
  3. Fiscal deficits in the advanced economies keep growing.
  4. The ETF’s monthly RSI crosses above 60 (currently at about 52). For those who are new to charts, check how the ETF has performed when its monthly RSI has crossed 60 in the past:

iShares Silver Trust ETF Moving Averages

Image Source: TradingView

To conclude: If you are a long-term investor, stay away from SLV. But if you are a short-term investor or trader, watch out for the signs above and trade the hell out of it.

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This article was written by

Michael A. Gayed, CFA profile picture
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