Not Just Gold: Silver ETF Holdings Plunge Too

June 26, 2013

The iShares Silver Trust (NYSEArca: SLV) has tumbled 12.5% in just the past month, but SLV’s share price is not the only thing about the ETF that is getting smaller. As is the case with physically-backed gold ETFs such as the SPDR Gold Shares (NYSEArca: GLD) and the iShares Gold Trust (NYSEArca: IAU), SLV is hemorrhaging holdings, in this case silver.

On Monday, SLV saw a 192-tonne, or almost 2%, decline to 9,882 tonnes, its biggest daily drop since June 2012, reports Frank Trang for Reuters. Holdings in six major silver ETFs tracked by Reuters fell to 16,139 tonnes, their lowest since December, according to the news agency. Other major silver ETFs include the ETFS Physical Silver Shares (NYSEArca: SIVR).

News of massive departures from SLV comes after a similar phenomenon has been seen with the aforementioned gold ETFs and related funds. In late April, holdings in gold exchange traded products slid to 166.3 metric tons, then a monthly decline record. [Gold ETF Holdings Plunge]

With institutional investors and hedge funds running out of the gold trade over the past 12 months, the value of holdings at various gold ETFs plunged $45 billion this year as of June 7. [Traders See Gold ETF Bargains]

Surprisingly, holdings at various silver ETFs, including SLV and SIVR, have been steady this year although both funds are flirting with year-to-date losses of 36%. Silver’s reputation as an industrial metal may be one reason why investors have stuck by the white metal, but that thesis could be jeopardized due to the slowing Chinese economy.

Evidence of an improving U.S. economy also has not helped prop up silver, which has performed noticeably worse than gold. The dislocation between silver and gold has become more pronounced on speculation that the Federal Reserve will start cutting back its quantitative easing programs in light of the improving economic conditions. QE’s end, which would mean the Fed feels good about the U.S. economy, would likely boost the U.S. dollar, in turn plaguing dollar-denominated precious metals.

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