We recently looked at global economic factors that have knocked silver prices down, but there’s another reason that precious metals, particularly silver, are taking a hit.
If we go back to our chart of the iShares Silver Trust (NYSE:SLV), the other thing that is impacting silver is it plays a dual role. It is a precious metal, but it also an industrial metal. Silver is used in the production of a lot of different pieces of high technology – circuit boards, for example. It’s also utilized as a raw material in other large construction.
So, when we see the economic numbers that we’ve seen coming out of Asia, which has been slowing down, especially China, and we see Europe slowing down quite a bit, as well as all of the GDP numbers from the major European countries coming in in negative territory, that tells us that demand is going to be down for silver in its role as an industrial metal. So, it’s had a double whammy working against it. That’s what we were looking at with a bearish trade in Silver Wheaton (NYSE:SLW) and why we also played a put option in SLV in SlingShot Trader.