Silver ETFs Shine, with Miners Taking the Charge

January 18, 2014

London (Jan 18)  Silver exchange traded funds are regaining their luster, with silver miners breaking out, after a dismal year depressed the precious metals.

Silver bullion-backed ETFs, iShares Silver Trust (SLV) and ETFS Physical Silver Shares (SIVR) , are testing their 50-day moving averages.  each down almost 3%. SLV is up 3.4% year-to-date while SIVR has gained 3.2%. The two funds declined 36.5% over the past year.

SLV is backed by silver bullion stored in JPMorgan Chase’s vaults in London and New York. SIVR holds its silver bullion in HSBC’s vaults in London.

Silver futures are up about 4.8% so far this year, with COMEX silver contracts trading around $20.3 per ounce.

Investors can also take a look at the PowerShares DB Silver Fund (DBS) , which tracks silver futures contracts. DBS is up 3.5% year-to-date.

Meanwhile, silver miner stocks are surging this year, with the Global X Silver Miners ETF (SIL) up 6.7%, iShares MSCI Global Silver Miners Fund (SLVP) up 7.6% and PureFunds ISE Junior Silver Small Cap Miners/Explorers ETF (SILJ) up 14.6% year-to-date. SILJ is higher by 6.5% on more than double the average daily volume late Friday. [ETF Chart of the Day: Super Silver Miners]

Silver stocks strengthened after strong guidance numbers, and miners are expecting higher production numbers this year. Many silver companies are increasing production to help offset lower silver prices. For instance, Endeavour Silver (EXK) reported a record silver production for the fourth quarter. [ETF Spotlight: Junior Silver Miners]

Silver, unlike gold, sees greater demand from the industrial sectors, notably in automotive industry, consumer electronics, chemicals and solar sector.

“Silver swings between dual roles as a useful industrial metal and safe-haven asset,” according to Morningstar analyst Alex Bryan. “Most of the time, industrial demand drives silver prices. However, during times of market dislocation, high inflation expectations, or economic uncertainty, investment demand for silver becomes the main price driver.”


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