When investors think of precious metals-related Exchange Traded Funds (ETFs), most investors immediately jump to a range of well-known gold ETFs which typically dominate the market for precious metals hedges and speculation over other metals.
Silver ETFs, while largely less-well-known than gold ETF counterparts, offer investors with a unique risk/reward profile, and additional diversification from holding a precious metal hedge position of only gold.
Gold and silver prices tend to move together (with a correlation of approximately 80%), though not always with the same speed, experiencing different levels of volatility and sensitivity to market events.
Silver ETFs such as ETFS Physical Silver Shares (NYSE:SIVR) have been on the rebound this year, currently up over 9% year-to-date, although slightly down from its 2017 high seen last month, approximately 5% higher than today’s level.
Market participants are largely split on the direction of the precious metal moving forward. The fact that silver is used both as a store of value and also as an industrial metal is something that differentiates this precious metal from gold.
Industrial production related to solar energy production, electronics, and automobile manufacturing are all activities generally highly correlated to the success of the North American economy.
Silver is thus typically considered to be more stable than gold over time due to the fact that owners of silver benefit both from market downturns (silver as a store of value) as well as bull markets (industrial metal), smoothing out the “macroeconomic hedge” aspect of the metal, especially when silver is compared with gold.
