First off, silver has many more uses than gold does. It is used for numerous industrial purposes and nearly 55% of total silver fabrication is used for industrial purposes. Silver is commonly used in the electronics space and can be found in plasma display panels and printed circuit boards, as well as in the lining of refrigerators, for food storage containers and for water purification. Additionally, the metal can be used as an antimicrobial to fight bacteria and as an antiseptic to treat fungal infections. Silver’s industrial uses even span to the solar energy industry. As economies around the world continue to expand, the industrial demand for silver will likely follow.
Another force that is likely to support silver is that valuations appear to be strong. In a nutshell, silver is cheap and depressed on a historical basis, when compared to its sister metal, gold. Gold is trading much higher than its long-term ratio of 16 times the price of silver, indicating that there is plenty of room for silver prices to run. Additionally, silver is nearly 70% below its all-time high witnessed in 1980 and well below its near-term high of $21 per ounce seen in 2008.
Lastly, diminishing supply is likely to bolster the metal. According to a study conducted by the United States Geological Survey, silver is nearly twice as rare as gold in the long term because it is not recycled at the same rates as gold and at current consumption rates all of the silver that is in the earth’s crust will diminish away in the next 25 years.
A combination of these factors will likely provide support to silver prices and the following ETFs are likely to reap the benefits:
- The iShares Silver Trust (NYSE:SLV), which physically holds silver bullion and closed at $17.24 on Thursday.
- The PowerShares DB Silver Fund (NYSE:DBS), which holds futures contracts in silver and closed at $31.14 on Thursday.
- The ProShares Ultra Silver (NYSE:AGQ), which seeks to gain twice the performance of silver bullion and closed at $55.55 on Thursday.
- Global X Silver Miners ETF (NYSE:SIL), which gives exposure to companies which are involved in mining, production and exploration of silver. (NYSE:SIL) closed at $14.36 on Thursday.
When in vesting in these equities, it is important to consider factors that could potentially hinder the price of silver like an unexpected surge in the dollar. A good to way to protect against these factors as well as the inherent risks involved with investing in equities, is through the use and implementation if an exit strategy which triggers price points at which an upward trend in gold could potentially be coming to an end.
According to the latest data at http://www.smartstops.net/, the price points for the aforementioned ETFs are: (SLV) at $16.80; (DBS) at $30.86; (AGQ) at $54.70; (SIL) at $13.31. These price points fluctuate on a daily basis and reflect changes in market conditions. Updated data can be found at http://www.smartstops.net/.
Kevin Grewal serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton.