While 2013 may have begun in a near commodity panic, prices have begun to rise for a number of natural resources as of late. This is particularly true in the precious metal market, as hard asset demand has surged while geopolitical risks have jumped as well.
These conditions have pushed some investors to scoop up precious metals, hoping to ride a wave of strength higher. While we have certainly seen this in the gold market, silver is presenting itself as an interesting opportunity as well (see all the Precious Metal ETFs here).
That is because this metal plays off of both industrial and safe haven demand, which has been a great combination as the U.S. economy—and other key economies such as in Europe—have picked up steam, while Mideast tensions and concerns over easing programs have risen too.
Furthermore, interest in silver ETFs in particular has been relatively high. In fact, while gold ETFs have seen more or less flat asset accumulation over the past month, silver ETFs have seen more than $100 million in inflows. This suggests that investors are increasingly looking at the white metal for opportunities in this interesting, but still uncertain climate.
Recent Trends, Future Demand
These investors have seen solid gains lately, as silver has risen by nearly double digits in the last three months, while (GLD) has added just over 2.2% and the S&P 500 was actually negative in the time frame. But investors have to be asking; can this trend continue and can silver stay on top?
We think that the answer is yes, especially if global manufacturing activity continues to rise, and if broad industrial demand increases. After all, nearly half of silver use goes towards industrial applications, so this looks to be a key driver.
Beyond that, international events also look to play a key role. Geopolitical concerns are building over a possible Syrian conflict, and there are concerns with spillover into other nations in the region. Additionally, there has also been some silver interest from the key Indian market, as import taxes on gold have dulled the yellow metal’s appeal in comparison, setting up a very favorable situation for silver from an international perspective.
How to Play
Investors can always just buy up silver bullion, or even look to silver miners such as in the ETF, (SIL). However, another option might be to play silver with an ETF, such as either of the following funds:
iShares Silver Trust (SLV)
This is easily the most popular fund tracking silver bullion, as it has just less than $8 billion in assets under management. The fund has a Zacks ETF Rank of 2 (Buy), while the expense ratio comes in at 50 basis points a year (also read Time to Buy the Covered Call Silver and Gold ETFs?).
ETFS Physical Silver Shares Trust (SIVR)
For a cheaper choice in the silver bullion ETF market, investors have SIVR from ETF Securities. This product is a bit less popular from an assets perspective though, so there may be slightly wider bid ask spreads. Still, this ETF also has a Zacks ETF Rank of 2, so it could be another great option in the space.