This Silver ETF Has Been Crashing. Is Now the Time to Buy?
Key Points
Investors loaded up on silver earlier in the year amid worries about the economy and Fed independence.
Those fears could come roaring back soon, as there's no shortage of uncertainty these days.
The price of silver has been falling recently, and the iShares Silver Trust (NYSEMKT: SLV), which tracks silver, has also been nosediving. It's down 8% this year, and at around $63, it's nowhere near its January high of around $110.
Investors have been pivoting to other investments of late as renewed confidence in the markets has driven the S&P 500 up more than 10% this year. But with plenty of question marks and uncertainty around the economy and its direction, could silver rally once again? Could now be a good time to add the iShares Silver Trust to your portfolio?
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Why silver may be due for a resurgence
What sent silver prices crashing in late January was U.S. President Donald Trump's announcement of his pick for the next Fed chair, Kevin Warsh, to replace Jerome Powell. Seen as a safe pick, the announcement appeared to inspire greater confidence in the Fed's path forward. Trump previously attacked Powell for not cutting rates fast enough and even threatened to fire him if he didn't leave when his term ended.
However, Warsh may not face an easier path ahead. Inflation has been rising, and economic conditions appear strong, at least on paper. While the president might want rate cuts, it may be difficult for the new Fed chair to justify them. If there isn't an indication that interest rates will be coming down this year, the possibility exists that it may again create friction between the president and the Fed chair, rattling markets in the process, and sending investors looking for safe havens such as silver once again.
Should you buy the iShares Silver ETF today?
It's hard to predict what will happen at the Fed or with interest rates this year, and investing based on such a premise can be risky. But it can nonetheless still be a good idea to hold the iShares Silver ETF in your fund for diversification purposes. Retail investors have shown an appetite for the ETF in times of adversity, and it can be a good way to hedge against market and Fed-related concerns in the future.
Having a diversified portfolio can be an effective way to reduce your risk in the markets, and holding the iShares Silver ETF can help you accomplish that. Plus, it could spike significantly in value if there's another rush to safe-haven investments. Regardless of what happens with silver in the near future, having exposure to it can be a good idea.
Should you buy stock in iShares Silver Trust right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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