The rally in gold prices since the start of this year has also benefited silver. This does not come as a surprise as silver prices usually track gold prices. Year-to-date, the Horizons BetaPro COMEX Silver Bull ETF (TSX: HZU) has gained more than 26%, easily outperforming the benchmark Canadian index.
HZU seeks daily investment results that correspond to two times the daily performance of COMEX silver futures contract for a subsequent delivery month. This means that when silver prices are rallying, HZU will outperform. However, when prices come under pressure, HZU will see far higher losses. With silver seeing a pullback lately, the question is should investors exit HZU.
As noted earlier, the rally in silver was sparked by an upward movement in gold. Gold though has come under pressure in the last two weeks as the Federal Reserve has indicated at a rate hike at its June meeting. The outlook for gold is uncertain but investors should remember that unlike gold, silver has industrial uses. This means, silver prices are not primarily driven by investment demand. Indeed, if the Fed is considering a rate hike, it means that the U.S economy is improving. An improving economy is a positive for silver. Therefore, investors should not write off silver as of now.
