Feb 05, 2021
Demand for silver skyrocketed this week, off the back of the latest campaign from Reddit’s r/wallstreetbets group. Investors may wonder what’s beyond the frenzy and whether the Reddit campaign has unexpected substance to it. Download the complete article here The Reddit Story Following a bid to counter short-selling of GameStop, r/wallstreetbets turned its collective eyes to silver. With the claim from some segments within the Reddit group that silver prices were being held artificially low by bank and hedge fund manipulation and short-selling, amateur investors piled in to purchase silver ETFs and mining companies in a bid to push prices up. There were record volumes for trades into US silver ETFs on Monday 2 February 2021 and prices rose to eight-year highs. While the GameStop campaign may have been successful in pushing prices up, silver is a different story for a few reasons. Firstly, silver is a far larger, more complicated and more valuable market compared to the much smaller share pool of GameStop. Silver is used and purchased for industrial and investment purposes and only a portion of the world’s silver reserves is traded on stock exchanges. Effectively, there are more factors influencing the prices of silver than simply share trading. Secondly, there are only limited short positions in silver, in fact, most banks and investment managers hold long positions on silver and held a positive outlook on silver’s prospects prior to the Reddit rally¹. By contrast, there were concerns over GameStop’s future before Reddit warriors pushed prices up to levels that are now considered vastly inflated compared to the company’s financial position and prospects. While the rationale for the silver Reddit rally may be flawed (and there are questions over the extent Reddit really caused the rally), investors may have inadvertently selected an asset with a promising outlook and potential benefits to a portfolio. It is up to investors to take the time to assess the value of silver before selling up when the frenzy eases. The drivers of silver and it's outlook in 2021 Silver has a range of uses and more than 50% of demand is for industrial purposes, such as in cars, solar panels, medical equipment and electrical circuits². Annually, over 36 million ounces of silver is used in motor vehicle production³ and this is predicted to grow to nearly 90 million ounces by 20254 Silver is also antimicrobial, which makes it popular in medical use5. In 2020, silver supply and demand was affected by COVID-19 with lockdowns dampening industrial demand, while mining production also fell and impacted supply. Industrial production is tipped to ramp up in 2021, supported by government stimulus packages globally, the rollout of vaccines and the prospect of economic recovery. In turn, demand for silver is likely to increase in line with this. Further, silver is heavily used in renewable energy systems, such as solar panels and as part of electronics. Silver is also likely to benefit from the refocused efforts on climate change globally, with a number of major renewable energy projects announced, such as the NSW government’s $32 billion renewable energy plan6. Investment demand for silver was also trending upwards from late 2020, with investors looking for alternative safe-havens to gold. Silver-backed exchange-traded products (ETPs) surpassed 1 billion ounces for the first time7. Silver can be used as a store of value and traditionally offers positive performance during periods of low interest rates. With the prospect of continued low global interest rate and concerns over potential inflation, investors have shown increased interest in exposure to this precious metal. To read more download the complete article
Jan 25, 2021
Investors may be feeling a cautious sense of optimism as we enter 2021 with global vaccine rollouts. Last year, technology companies and commodities were investment winners, so what will 2021 hold for investment markets? There are three trends we see influencing ETF investments in 2021: the movement to value, thematic investing and short & leveraged investing. Download the complete paper here Movement to value As news of vaccines hit markets in late 2020, investors started to shift their approach away from a pure growth focus and towards value investments such as banks and industrials. This trend is likely to continue in 2021 as investors anticipate a return to ‘normal’ and start to view growth stocks, particularly in the technology sector, as overpriced. The Australian sharemarket is strongly skewed towards financials and resources, including companies typically falling into value investments. Investors could consider tailored Australian exposures such as ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU). Thematic investing with climate and biotechnology Investors are increasingly interested in tailored investments accessing the growth themes of the future, as well as being able to invest according to their views and values. ETFs targeting specific themes should continue to be prominent in the coming year and investors are becoming more aware of how to use these as part of their portfolios. While themes like virtual connectivity will continue to be popular, dynamics in the coming year should mean climate change and biotechnology will be focus points for investors. Investors considering thematic investing may wish to look at ETF Securities’ Future Present Range of ETFs. Those specifically interested in biotechnology may consider ETFS S&P Biotech ETF (ASX Code: CURE). Alternatively, investors focused on renewable energy may consider battery technology which is a key supporter for the viability of renewable energy. ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) is the only Australian-listed ETF to offer exposure to the global battery technology supply chain. Short and leveraged investments Across the volatility of 2020, many self-directed sophisticated investors took a short-term approach to trading and embraced short & leveraged funds. As the world continues to recover from COVID-19 and manages the ongoing tension in global relationships, use of short and leveraged instruments is likely to continue along with continued bouts of volatility. Some sophisticated investors may anticipate changes in growth sectors like technology as the world opens again and choose short-term investments reflecting their views. For more information on the short & leveraged investments offered by ETF Securities, please click here. Moving forward in 2021 The last year was unexpected and has shifted global investment behaviour and dynamics. The Australian ETF market will continue to grow and evolve to meet the needs of investors and if the past year is any indication, investors are looking for opportunities and increasingly using ETFs for their market exposure.