ETFs Charted #13: Silver, Ether, Nuclear, Defense and More

Silver is Up 25% this Year, What About the Flows?

Silver rose above $29 per ounce recently, hitting an over two-week high amid expectations that the US Federal Reserve will start cutting interest rates in September. ETF investors have poured $680 million (net) this year into Silver ETPs globally. Notably, The iShares Silver Trust ETF ($SLV) has experienced significant recent demand, attracting $919 million in net inflows over the past month. This marks an appetite reversal after substantial outflows during the first two quarters of the year.

Silver Supply / Demand Dynamics

Silver market experts form the Silver Institute, CPM Group, Wood Mackenzie, and HSBC Global Research, anticipate a worsening supply-demand imbalance in 2024. Soaring demand from sectors like electronics, solar energy, and electric vehicles is outpacing production. With dwindling mine output and limited new discoveries, the situation is ripe for price fluctuations, supply chain disruptions, and heightened competition for this essential metal.

Source: The Silver Institute

Why Aren't Spot Ether ETFs Taking Off?

Spot Ether ETFs have struggled to replicate the success of their Bitcoin counterparts. Despite buzz pre-launch and global media coverage, they have seen modest investor interest, with only $11 million in net inflows this month and a net outflow of $166 million since their debut.

Is it because it's summer time? or investors just don't understand what Ether /Ethereum is or what it does.

Well, 10x Research has attributed the lack of enthusiasm from institutional investors towards Spot Ethereum ETFs to their limited understanding of the underlying asset. Wall Street investors, known for their cautious approach, often shy away from investments they don't fully comprehend. The report highlights that issuers have struggled to distill Ethereum's use case into a simple, relatable concept, unlike Bitcoin's "digital gold" analogy.

The research firm also highlights the insufficient marketing efforts by ETF issuers. Without a clear and compelling narrative, these funds have failed to capture the attention of potential investors.

Furthermore, 10x Research expresses bearish sentiment towards Ethereum itself. The firm cites the stagnation of key fundamentals like new users and revenues, and the diminishing use case of Ethereum in the current market cycle. In contrast, Solana, with its strong meme coin ecosystem, has gained traction and outperformed Ethereum.

View all 62 Spot Ether ETPs ➡️

The Cooling of the Nuclear Theme Despite Hot Flows

What's going on

The Nuclear Energy theme, which surged over 70% since 2023 driven by rising uranium prices amid supply disruptions and increased demand, has recently encountered a cooling period. After consecutive monthly declines of -10.5% and -4.5% in June and July, respectively, the theme is currently down another -10% in August, marking its third straight month of losses.

Uranium prices have dipped -11% YTD and -25% since reaching a 17-year high earlier in the year primarily due to broader commodity market weakness, seasonal factors, and a temporary pause in expected buying activity following the passage of the Prohibiting Russian Uranium Imports Act.

Despite the slight decline, uranium prices remained elevated due to strong long-term fundamentals, such as global commitments to expanding nuclear energy capacity and ongoing supply concerns.

The energy commodity's future looks bright, according to experts, and ETF investors are taking notice. Nuclear ETFs have seen a net inflow of $1.25 billion this year, reflecting growing bullish sentiment.

China's nuclear move adds fuel to the long-term picture

In breaking news, China has approved a record 11 nuclear reactors across five sites, marking a significant push towards atomic energy to reduce emissions. The approved sites are located in Jiangsu, Shandong, Guangdong, Zhejiang, and Guangxi, with a total investment of at least 220 billion yuan ($31 billion) and an estimated construction period of five years.

China, which already leads the world in nuclear reactors under construction, is on track to become the leading atomic power generator by 2030, surpassing France and the US. The new reactors include advanced designs like the fourth-generation high-temperature gas-cooled reactor and the Hualong One, which uses predominantly Chinese-made components. The country is expected to continue approving around 10 new reactors annually for the next three to five years.

⚙️Sector Trends

Despite analyst concerns about overvalued tech stocks and the risk of a market correction, US ETF investors remain enthusiastic about the sector, pouring $20 billion into tech-focused funds this year.

View all US Technology ETFs ➡️

The tech sector's 21% year-to-date outperformance relative to the SPY (18%) highlights investor confidence in its long-term growth potential, fueled in part by the ongoing development and adoption of artificial intelligence (AI) technologies.

Utilities, a favored sector amidst expectations of lower interest rates, have experienced strong performance (Utilities ETFs up 20% YTD) and significant inflows of $1.6 billion this year.

View all US Utilities ETFs ➡️

Financials and industrials have also attracted substantial capital, with inflows of $3.2 billion and $3.1 billion, respectively.

View all US Financials ETFs ➡️

View all US Industrials ETFs ➡️

Gearing Up for War?

Defense ETFs, particularly in Europe, continue to attract significant investor interest. The VanEck Defense UCITS ETF (DFEN), launched in March 2023, has rapidly amassed $1 billion in assets under management, driven by $775 million in net inflows this year.

📰 Here's Why: Defense ETFs on Investors’ Radar as WWIII Concerns Escalate ➡️

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.