Precious metals have been on a smooth ride with silver prices skyrocketing to their highest level in seven years. Silver price soared 15% last week, bringing year-to-date gains of 28%. With this surge, the white metal is outpacing gold, which has rallied 24% so far this year (read: Here’s Why Silver Outshining Gold ETFs).
The twin tailwinds of rebounding industrial and manufacturing demand, and resurgence in safe-haven demand due to surging COVID-19 cases led to the rally in silver price. In particular, a spike in manufacturing activity in China after the outbreak of coronavirus and faster-than-expected Chinese economic growth in the second quarter compelled investors to flock to silver. Notably, silver 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.
The metals’ rally was also powered by low interest rates and a wave of stimulus to cushion the virus-hit economies. Central banks across the globe have injected trillions of dollars into the economy with exceptionally low interest rates that has put pressure on the U.S. dollar and boosted dollar-priced commodity prices. The commodity got an extra boost on increase in investment demand and reports of supply shortage amid increased industrial demand.
A weak dollar, hopes of fresh economic stimulus measures from central banks and simmering U.S.-China tensions will further drive growth in the white metal. Silver is often regarded as a store of wealth and an alternative to risky assets. Apart from these, global push on green energy, growing demand in areas like 5G, 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 of solar panels and electronics.
Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. As such, mining stocks have delivered incredible returns (see: all the Materials ETFs here).
We have highlighted silver ETFs, whether as a commodity or a mining stock that led the way higher last week and could be excellent plays for investors who believe that silver will continue to move higher.
Silver ETFs to Play Commodity
iShares Silver Trust SLV – Up 17.8%
The fund offers exposure to the day-to-day movement of the price of silver bullion. It is an ultra-popular silver ETF with AUM of $12.5 billion and heavy volume of 29.3 million shares a day. It charges 50 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: ETFs Ways to Tap the Rise in Silver Price).
Aberdeen Standard Physical Silver Shares ETF SIVR – Up 17.5%
This fund has AUM of $652.3 million and trades in moderate volume of around 321,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses. Expense ratio is 0.30%. SIVR has a Zacks ETF Rank #3 with a High risk outlook.
ETRACS CMCI Silver Total Return ETN USV – Up 16.7%
This ETF follows the UBS Bloomberg CMCI Silver Total Return, charging investors 40 bps in annual fees. It has AUM of $4.3 million and trades in paltry average daily volume of 800 shares. The product has a Zacks ETF Rank #3 with a High risk outlook.
Silver ETFs to Play Mining Stocks
Global X Silver Miners ETF SIL – Up 14%
This product provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 27 stocks in its basket with double-digit concentration on the top three firms. Canadian firms take the largest share at 52.5%, while Cyprus, Mexico and South Korea round off the next three spots. The fund has managed assets worth $1 billion and trades in a good volume of about 624,000 shares a day. It charges 66 bps in annual fees (read: 3 Top Sector ETFs to Start Q3 With More Room for Growth).
ETFMG Prime Junior Silver ETF SILJ – Up 12.8%
SILJ provides direct exposure to the silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 48 stocks in its basket with higher concentration on the top three firms. Canadian firms take the lion’s share at 69%, while the United States and Peru take the remainder. The fund has managed assets worth $423.7 million and trades in good volume of nearly 1.3 million shares a day. It charges 69 bps in annual fees.
iShares MSCI Global Silver Miners ETF SLVP – Up 11.4%
This fund 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 29 stocks in its basket with Canadian firms making up the lion’s share at 64.3%. The United States, South Africa and Mexico are some of the other top countries. SLVP has AUM of $217.1 million and average daily volume of more than 216,000 shares. It charges 39 bps in annual fees.