By Zacks Equity Research
After three years of losses, the first half of 2016 brought unparalleled gains for gold ETFs. The metal was on a tear on safe haven demand and dovish central banks across the developed economies to ward off growth issues. A rush to safety for the most part of 1H16 were triggered by the Chinese market upheaval, a 12-year low oil price in the first quarter and a major event like Brexit at the end of the second quarter (read: Top ETF Stories of the First Half of 2016).
Almost the entire world speculated the deepening of global growth worries as a fallout of Brexit. As a result, risky assets fell out of investors’ favor and safe haven assets like gold gleamed. Plus, the Fed’s dovish stance throughout 1H16 stalled the strength in the greenback, spreading joy across broad-based commodity investing.
Gold bullion ETF SPDR Gold Shares GLD is up over 26% so far this year (as of July 1, 2016) as the metal has experienced the “best two quarters” in nine years. The road ahead is likely to be smooth as the Fed is expected to stay put in the near term thanks to the likely contagion of global issues like Brexit (read: 1H ETF Asset Report: Gold Glows; Equities Fade).
Silver ETF to Outshine Gold in July?
This white metal has seen extremely solid trading in recent times and is on its way to a 2-year high. The drivers behind the silver surge were more or less similar to gold. The metal crossed the $20-dollar level lately for the first time in nearly two years. The jump was so acute that silver has actually breezed past the yellow metal in recent trading.
The silver bullion ETF iShares Silver Trust SLV is up over 42% in the year-to-date frame (as of July 1, 2016). So will July be a better month for silver than gold?
Industrial Demand to Pick Up: Silver has high usage in industrial activities with about 50% of total demand coming from industrial applications. With China, the biggest industrial fabricator after the U.S., still struggling on the industrial sector, silver has definitely lost some shine. But a pickup in industrial activities in other corners of globe is expected ahead thanks to a host of stimulus measures.
Particularly, the U.S. factory activity index jumped to the 16-month high in June, giving room for rally to silver. Probably, such sound manufacturing data pushed up SLV by 4.9% on July 1 – the day manufacturing data released. The fund added over 0.2% after hours. Notably, the Euro Area manufacturing index measured by Markit also speaks of solid trends.