Yahoo Finance ETFs Ride on Decade-High Silver Prices: Will the Rally Last?
Silver broke $30 per ounce for the first time in decades, bolstered by fresh bets on Fed rate cuts following cooling inflation data. A projected fourth annual market deficit, increased industrial demand, rising geopolitical tension and uncertainties ahead of general elections in major economies added to the strength. Notably, the white metal is one of the best-performing major commodities so far this year, having risen 32% and outperforming gold.
Silver miners also spiked as these are the biggest beneficiaries of a surge in silver prices. These act as a leveraged play on underlying metal prices and thus tend to experience more gains than their bullion cousins in a rising metal market.
That being said, we have highlighted five ETFs that have been on a surge this year, gaining more than 20%. These include abrdn Physical Silver Shares ETF SIVR, iShares Silver Trust SLV, iShares MSCI Global Silver and Metals Miners ETF SLVP, ETFMG Prime Junior Silver ETF SILJ and Global X Silver Miners ETF SIL. The trend is likely to continue, at least in the near term.
Rate Cut Bets
Inflation in the United States cooled down for the first time in six months, sparking the expectation of the first interest rates cut soon. Traders now expect a 65% chance of a U.S. rate cut by September. A lower interest rate environment raises demand for silver as the precious metals do not pay any interest, making them appealing compared to alternative investments like bonds (read: Growth ETFs to Buy as Easing Inflation Fuels Rate Cut Bets).
Solid Demand/Supply Trends
The silver market is heading for the fourth year of deficit, with this year’s shortage seen as the second biggest ever. Per the Silver Institute industry association, the global silver deficit is expected to rise 17% to 215.3 million troy ounces in 2024, driven by robust industrial demand.
The Silver Institute predicts global demand to reach 1.2 billion ounces this year, which would mark the second-highest level on record, given the continued strength in industrial end-uses and recovery in jewelry and silverware demand. The institute anticipates a 9% increase in demand for silverware and a 6% rise in jewelry demand this year. A projected recovery in consumer electronics will also provide a boost to the silver market.
The white metal is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers (read: Mining ETFs Win in Turbulent April With Double-Digit Gains).
Further, the global push for green energy, increasing demand in areas like 5G, a rebound in global computer shipments, the photovoltaics (PV) and automotive industries and new sources of demand for sensors used in IoT and OLED lighting will continue to boost silver demand. Silver is largely used for manufacturing solar panels and electric vehicles and will play a key role in the shift to 5G wireless network technology.
Store of Wealth
Silver is often used as a means of preserving wealth during times of financial and political uncertainty, and usually does well when other asset classes struggle. Factors such as the forthcoming U.S. presidential election, the ongoing Russia-Ukraine war and the Israel-Hamas conflict enhance both metals’ attractiveness to investors.
We have discussed the abovementioned ETFs here:
abrdn Physical Silver Shares ETF (SIVR) – Up 32.4%
abrdn Physical Silver Shares ETF tracks the performance of the price of silver less the Trust expenses. It has an AUM of $1.3 billion and trades in a good volume of around 1.5 million shares per day on average. SIVR has an expense ratio of 0.30%.
iShares Silver Trust (SLV) – Up 32.2%
iShares Silver Trust offers exposure to the day-to-day movement of the price of silver bullion. It is an ultra-popular silver ETF, with an AUM of $12.1 billion and a heavy volume of 31 million shares a day. It charges 50 bps in fees per year from investors.
iShares MSCI Global Silver and Metals Miners ETF (SLVP) – Up 29.6%
iShares MSCI Global Silver and Metals Miners ETF follows the MSCI ACWI Select Silver Miners Investable Market Index, providing investors exposure to companies that derive the majority of revenues from silver exploration or metals mining. It holds 34 stocks in its basket, with Canadian firms making up the lion’s share at 70.4%, while the United States and Mexico round off the next spots. iShares MSCI Global Silver and Metals Miners ETF has AUM of $236.6 million and an average daily volume of about 217,000 shares. It charges 39 bps in annual fees.
ETFMG Prime Junior Silver ETF (SILJ) – Up 27.4%
ETFMG Prime Junior Silver ETF is the first ETF to target small-cap silver miners. It provides direct exposure to the small-cap silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. ETFMG Prime Junior Silver ETF holds 51 stocks in its basket, with Canadian firms taking the lion’s share at 58%, while the United States takes 15% exposure. It has managed assets worth $916.7 million and trades in a good volume of nearly 2 million shares a day. It charges 69 bps in annual fees (see: all the Materials ETFs here).
Global X Silver Miners ETF (SIL) – Up 24.2%
Global X Silver Miners ETF provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 33 stocks in its basket with double-digit concentration on the top two firms. Global X Silver Miners ETF has managed assets worth $1.1 billion and trades in a good volume of about 731,000 shares a day. It charges 65 bps in annual fees.
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iShares Silver Trust (SLV): ETF Research Reports
abrdn Physical Silver Shares ETF (SIVR): ETF Research Reports
Global X Silver Miners ETF (SIL): ETF Research Reports
Amplify Junior Silver Miners ETF (SILJ): ETF Research Reports
iShares MSCI Global Silver and Metals Miners ETF (SLVP): ETF Research Reports
