Key insights
- The article predicts a rise in silver prices and the iShares Silver Trust (SLV) after May 15, driven by potential uncertainty surrounding a change in Federal Reserve leadership. The author suggests that Kevin Warsh's expected appointment as Fed chair, coupled with Jerome Powell's potential continued presence and Trump's past comments, could create market instability, leading investors to seek safe-haven assets like silver.
Investors don't appear to be as excited about silver as they were earlier in the year. On Monday, the precious metal was trading around $73, a far cry from the highs it reached in January, when it traded above $121 per ounce. That's a 40% decline since then.
Typically, there's significant demand for silver and gold when investors are concerned about the economy, which doesn't appear to be the case these days. The S&P 500 has been rising of late, and in the process, silver has been sliding. During the past three months, the broad index has climbed by 4% in value, while the iShares Silver Trust (SLV 3.44%), which tracks the price of silver, has fallen by 14%.
However, I predict that after May 15, investors will once again begin loading up on silver.
May 15 is an important day for the stock market as a whole, not just silver. It marks the end of Jerome Powell's term as Fed chair. Kevin Warsh is expected to take over, and with that comes a Fed era that could be mired in uncertainty and controversy. Warsh is President Trump's chosen successor, and the expectation is that rate cuts will follow.
The market may have worries about the Fed's independence under Warsh. Another concern is that Powell isn't planning on leaving the Fed. He has indicated he will stay on as a governor until a controversial federal investigation into him is resolved and completely over, "with transparency and finality." Trump has previously said he would fire Powell if he didn't leave willingly, and such a move could wreak havoc on the markets, prompting investors to seek safe-haven investments such as silver.
I don't believe the drama at the Fed is going to end quickly or quietly. And with valuations high and the economy still on shaky ground, there are already ample reasons for investors to consider opting for safety these days. Adding Fed uncertainty into the mix may lead to a surge in demand for silver, which would send the value of the iShares Silver Trust soaring in the process.
Whether you're bullish on silver, worried about Fed uncertainty, or just want a good way to diversify your portfolio, now may be a good time to add the iShares Silver Trust to your portfolio.