Commodity Trading Trends: Silver Futures Take The Lead For 2012 (SLV, SLW, GLD, AGQ, ZSL)

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February 22, 2012 12:02pm NYSE:AGQ NYSE:SIVR

Jared Cummans:  When investors think of precious metals, their go to image is gold. Gold (NYSEArca:GLD) has gobbled up headlines over the past year as it has smashed through historical highs and been a major point of contention among the financial world. But digging deeper than gold, there is another

precious metal that is outperforming its popular counterpart; silver. While gold’s massive gains were thrust into the spotlight, silver has been able to provide massive returns without all of the fame and popularity. The investment thesis behind silver is also different from gold, as silver is a relatively practical metal from an industrial standpoint, but is also used as a safe haven metal much like gold [see also Why No Investor Should Own GLD].

For the time being, silver futures are leading all commodities on the year, as they have overtaken the first place crown that had been held by orange juice futures for several weeks. The precious metal is up over 24% on the year as it has experienced a fair amount of headwinds with traders and investors. Industrial silver demand was very strong last year, but that has changed to more of an uncertain outlook for the coming year. Despite the hazy demand predictions, silver has remained resilient and has proven itself to be the best precious metal on the year. Note, however, that the lack of direction as far as demand outlook is concerned could make silver a volatile play, as it has the potential to make strong gains, but also accumulate massive losses [see also 25 Ways To Invest In Silver].

Ways To Play

For those looking to invest in silver, there are a number of options that will appeal to both traders and more traditional investors. From a trading standpoint, the March silver futures contract on the COMEX is trading with the highest volume of any near-term contract. Perhaps the most liquid option out there comes from the iShares Silver Trust (NYSEArca:SLV) which measures physical bullion. The fund makes for a perfect trading option, as it has an ADV topping 19 million shares; however, given its physical nature, it can also be an integral part of a longer-term portfolio. Finally, for investors who want something of a leveraged play on the metal, Silver Wheaton (NYSE:SLW) is a popular mining firm that will usually offer a relatively high beta [see also 12 High-Yielding Commodities For 2012]. [Related: ProShares Ultra Silver (NYSEArca:AGQ), ProShares UltraShort Silver (NYSEArca:ZSL)]

Written By Jared Cummans From CommodityHQ Disclosure: No positions at time of writing.

CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.


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