- Silver has been in a long-term downtrend since hitting a high in 2012.
- Nonetheless, several bullish catalysts have come to fruition as of late.
- My vehicle of choice to play silver is the iShares SLV ETF.
- In the following article I make the case to buy the SLV now.
I believe the bottom for silver is in. My vehicle of choice to play silver is the iShares Silver Trust Fund (NYSE: SLV). SLV has been in a long-term downtrend since touching an all-time high of $48 in 2011. Even so, I posit now could be the ideal time to buy SLV shares. The weakening dollar and inflation finally raising its ugly head are the primary culprits. These developments combined with several positive catalysts on the horizon lead me to believe the SLV has nowhere to go but up.
The Fed’s dovish tone
A strong U.S. dollar began to sell off courtesy of Federal Reserve’s dovish tone at its most recent meeting.
Furthermore, the Fed chair’s decision to not increase the trajectory of rising rates incited a strong bid for commodities and foreign currencies after leaving the forecasts for rate hikes in 2017 at two. I believe the Fed is playing it safe by maintaining such a dovish stance. This happens every time. The Fed always seems to tighten or loosen interest rates for long after they should have stopped.
This leaves the door open for inflation to spike even higher in the coming years. Basically, the Fed would rather fight off rising inflation in the future than be blamed for crashing the markets now. Fortunately, the SLV provides an ideal hedge. The S&P 500 and the SLV have shown a near perfect inverse correlation for the past few years.