ETN Yields Soar... Dominating Top Growth Rates
Precious Metals Prices Rise on US Interest Rate Cut Expectations
Silver Undervalued Compared to Gold at Record Highs
Investment Appeal of Silver Increases Relative to Gold as Real Interest Rates Fall
Recently, with the rise in raw material prices, the prices of precious metals such as gold and silver have also surged, leading to soaring returns on silver exchange-traded notes (ETNs). While gold has reached an all-time high, there is a growing outlook that the undervalued silver holds greater investment appeal going forward.
According to the Korea Exchange on the 27th, silver futures ETNs dominated the top returns from the 16th to the previous day. The KB Leverage Silver Futures ETN(H) rose 14.29% during this period, recording the highest return among all ETNs, followed by Shinhan Leverage Silver Futures ETN(H) at 14.23%, Meritz Leverage Silver Futures ETN(H) at 13.88%, Samsung Leverage Silver Futures ETN(H) at 13.86%, N2 Leverage Silver Futures ETN(H) at 13.35%, and KTB Leverage Silver Futures ETN at 11.58%. Silver futures ETNs took the top six spots in returns. The leverage silver futures ETNs are products that buy silver futures listed on the New York Commodity Exchange (COMEX) and track twice the daily return.
The rise in gold prices hitting record highs and the increase in silver prices are interpreted as factors driving the returns of related ETNs upward.
The spot price of gold rose to $2,509.65 per ounce on the 16th, surpassing $2,500 per ounce for the first time ever, and surged further to $2,531.60 on the 20th. Since then, it has been moving around the $2,500 level. Gold futures prices are also on the rise. As of the 23rd, the closing price for December delivery gold futures on the New York Commodity Exchange was $2,546.30 per ounce. Gold futures prices have increased by nearly 3% just this month. Silver prices are also on an upward trend. The most recent monthly silver futures price traded on the New York Commodity Exchange was $29.82 per ounce, also rising about 3% this month.
The rise in precious metal prices has been influenced by expectations of interest rate cuts. Gold, a representative safe-haven asset, has been on an upward trend since the end of last month due to expectations of a Federal Reserve (Fed) interest rate cut in September combined with geopolitical risks in the Middle East. Generally, gold prices rise when interest rates fall, as it is seen as an alternative investment to the dollar.
Hwang Byung-jin, a researcher at NH Investment & Securities, said, "Under the Fed's monetary policy stance, which is expected to shift to 'easing' starting with the September Federal Open Market Committee (FOMC), the precious metals sector continues to show strength." He analyzed, "Gold prices have surpassed $2,500 per ounce, setting quarterly record highs since the fourth quarter of last year, and silver prices have also exceeded $30 per ounce this year, rising more than 20% compared to the beginning of the year." He added, "However, unlike gold, which has repeatedly hit all-time highs, silver prices have frequently experienced increased volatility around the $30 per ounce level, with repeated failed attempts to rise toward the all-time high of $50."
There is an opinion that attention should be paid to the undervalued silver compared to gold, which has soared to record levels. Researcher Hwang said, "If recent fears of an economic recession are unfounded, silver prices, which are below $30 per ounce, present a clear buying opportunity." He explained, "Silver, which along with gold makes up the precious metals sector, is consumed about half for industrial use, so it plays a bigger role as an inflation hedge asset rather than a pure safe-haven asset, thus expanding its investment appeal compared to gold when real interest rates fall."
The upward trend in precious metal prices is expected to continue. Lee Young-hoon, a researcher at Samsung Securities, said, "The rise in precious metal prices is mainly driven by increased expectations of U.S. interest rate cuts. Although the excessive reflection of interest rate cut expectations within the year may act as a factor to moderate the pace of the precious metals' rise, the upward trend is likely to continue." He added, "Other factors beyond interest rates, such as safe-haven preference, central bank gold purchases, and a rebound in gold holdings by exchange-traded funds (ETFs), can sustain the trend."
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