Investing in a silver ETF is similar to investing in a gold ETF but there are some major differences. Here I will compare silver with gold.
Silver for production uses
Just like gold, silver is being used in industrial applications. The industrial need for silver is larger than that for gold. About half of the silver production is being used in industrial applications. So the global market conditions are an important price factor for a silver ETF.
Silver in jewelry and luxury items
Despite some personal preferences for silver instead of gold one may conclude that gold is the number 1 precious metal for the use in jewelry. The reason is simple: gold is more precious and more expensive and that creates an appeal of its own.
There are some important regional differences here. In western countries silver is seen as a good alternative but in some other countries silver is just inferior to gold which makes it improper as a gift.
Silver is the preferred toy of speculators
Historically there is always some sort of close relationship between the price of gold and silver. But for some periods in time this relationship is unbalanced, especially when silver speculators are playing their game.
In a declining market a silver ETF is declining on average twice as fast as gold. In a rising market it is the other way around and a silver ETF is rising twice as fast as gold. There are many reasons for this phenomenon. I will mention some:
For the same amount of money you can buy kilograms of silver where you can buy only a few grams of gold. When large amounts of money are investing (or divesting) in silver this may cause larger effects than in the gold market.
If gold is rising fast many owners of gold jewelry begin to sell their jewelry putting the price of gold down. Due to the low weight of silver in jewelry this effect is not that big. It is very simple, with an expected rise of precious metals investments in a silver ETF will have a return almost twice as much in silver than in gold.
The same goes for a negative turn of the market. A return of 300% to 400% over a couple of years is no exception with a silver ETF, but of course the other side of the medal is similar.
ETFS Physical Silver ETF
ETF Securities makes it possible to invest in physical silver through this silver ETF. The physical silver bars will be put in a vault at HSBC bank. Of course it is a big advantage that the silver bars will be effectively bought on the market. So it’s a very secure and safe way of investing, it is all very tangible and clear.
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ETFS Physical Silver ETF info:
ETF provider: ETF Securities
Exchange: Euronext Amsterdam
This ETFS Physical Silver ETF has quotations on different exchanges and is known under several ticker symbols. As long as the ISIN number is identical you are dealing with the same ETF.