New ETF USLV Will Shine if Silver Rebounds

To say silver is in the midst of a precipitous decline is an understatement. The iShares Silver Trust (SLV), the largest ETF backed by physical holdings of the commodity, is off 38% over the past six months.

However, both gold and silver prices showed some signs of life over the past week. Whether legitimate rebounds are afoot for the precious metals is to be determined, but risk-tolerant traders willing to wager on a silver resurgence may want to consider the Direxion Daily Silver Bull 2X ETF (USLV).

USLV, which debuted in May, attempts to deliver 2x of the daily returns of spot silver prices using the aforementioned SLV as a reference tool. That means that the new Direxion ETF isn’t for the faint of heart, nor should it be held over extended timeframes. That said, USLV could shine if silver rallies past some resistance areas in convincing fashion.

“The metal has recovered from recent lows, but repeated selling near $57 shows that investors are using rallies to reduce exposure rather than chasing prices higher,” reported Invezz. “A convincing advance would require stronger follow-through above recent resistance and signs that buyers are prepared to hold positions through heightened volatility.”

What Needs to Happen to Stoke a Silver Rally

Identifying catalysts for silver and USLV isn’t difficult. The war in Iran has been an obvious drag on the white metal, and for multiple reasons. For starters, gold hasn’t lived up to its safe-haven reputation during the conflict. That has plagued the highly correlated silver.

Second, the dollar firmed in response to the war, in a bad turn for dollar-denominated silver. Third, high oil prices resulting from the war are driving inflation to the upside. That diminishes the odds that the Federal Reserve will lower interest rates this year. High interest rates make bonds more appealing than gold or silver. After all, there’s no income associated with physical ownership of those commodities. All together, USLV could get a boost from lower oil prices and an end to the war.

Forecasting when that will happen is a different matter. However, a case can be made that silver is still in a solid place, fundamentally speaking.

“In the long run, besides the US-Iran situation, silver’s own supply and demand dynamics also warrant attention,” according to Trading Key. “The silver market has been in a supply deficit for several consecutive years. The Silver Institute forecasts a silver shortage of approximately 67 million ounces in 2026, with physical inventory depletion providing medium- to long-term support for silver prices. This suggests that amid high macroeconomic uncertainty and investors seeking alternatives to gold, there remains capital allocation demand for silver.”

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