While the Silver Trust is up by around 20% year-to-date, more gains could be ahead as the index looks to be forming a long-term bottoming formation. Precious metals gained their luster in the aftermath of the financial crisis as central banks across the globe eased monetary conditions. iShares Silver Trust, for example, increased in price by over 300% from 2009 to 2011.
In recent years, however, both gold and silver declined on expectations of tighter U.S. monetary policy, as well as the strength of the dollar. The near 70% decline from its peak to mid-2015 led many to believe that silver had sold off too steeply though.
With economic conditions deteriorating in most developed, as well as emerging markets in 2015, investors rethought the premise of tighter policy conditions. This has led to a consolidation, and possible reversal pattern in PowerShares DB US Dollar Index Bullish (UUP) - Get Report as the market re-prices U.S. policy.
Considering the current sentiment in markets regarding both global economic health, as well as valuation levels of financial assets, precious metals, such as silver, are proving attractive holdings. Investors are finally beginning to catch on, meaning that owning both silver and its producers could yield solid results over the coming year.
This article is commentary by an independent contributor. At the time of publication, the author was long SLV calls.