Silver has had a good run in late summer.
After trading below $20 an ounce in late June and July, the price rallied 20% to top $24 an ounce. It was at $23 about 10 days ago.
On Friday, the iShares Silver ETF (SLV) rose nearly 2%, and the metal ended the weak at about $21.7 an ounce.
Over the past six weeks, SLV has outpaced SPDR Gold Shares (GLD) by a wide margin. It moved up 13% since Aug. 1 vs. about a 1% gain for GLD.
What does McGlone see currently as a mid- to longer-term outlook for the precious metal, and how does he define its role in client portfolios.
The market conditions were ripe for a rally in late summer, the analyst noted in a recent interview, and given silver’s historical volatility and investors’ search for value, the rapid price increase wasn’t unexpected.
Even after the rally, however, silver remains well below its 200-day moving average of about $26 an ounce.
Looking ahead to the intermediate and longer term, McGlone (right) sees several factors that will support the price and move it higher.
First, silver is a hybrid metal. It trades as both an industrial metal and a precious metal.
On the industrial side, he points to statistics like the Purchasing Managers Index, or PMI. The PMI came in at 55.7 for August, and the overall trend shows continued, albeit modest, growth in the U.S. economy.
Additionally, the use of silver in photovoltaic production for solar panels, especially in China, is projected to possibly double within two years, which could “increase to 10% of global annual production for silver,” says McGlone.
Silver sales continue at a high level, supporting the precious metal demand.
U.S. Mint’s sales of American Eagle silver coins through August surpassed the total for all of 2012, according to a Bloomberg report. The Mint sold about 33.75 million ounces of the silver coins year to date, compared with 33.74 million 2012.