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Silver Spikes to 8-Year High of $30: ETFs to Ride the Rally

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Silver has been on a tear lately with its price climbing to $30 per ounce for the first time since 2013 in a Reddit-fueled frenzy. Reddit’s WallStreetBets forum declared silver “THE BIGGEST SHORT IN THE WORLD” last week, encouraging traders to pile into the grey metal.

The social media, including thousands of Reddit posts and hundreds of YouTube videos, made calls to buy the metal and emulate the frenzy that drove up shares in the U.S. video games retailer GameStop (GME - Free Report) by 1500% in just two weeks. Per Gregor Gregersen, founder of Singapore-based dealer Silver Bullion Pte, “the demand for physical silver is unprecedented, broad-based and deep with record number of orders as well as new record size orders over the past 24 hours.” Coin-selling websites also reported unprecedented demand and flagged delays in delivering silver.

Additionally, the optimism over global economic recovery in the post-pandemic world will likely boost manufacturing and industrial activities. 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 (read: 3 Reasons Why Commodities ETFs May Rally in 2021).

The growing economy will also push up inflation, thereby leading to higher demand for silver as an inflation hedge. Further, the ongoing growth in the global solar PV industry, a rebound in global computer shipments, and new sources of demand for sensors used in IoT and OLED lighting will continue to provide a boost to silver demand. Silver is largely used for manufacturing of solar panels and electronics.

The world’s largest silver-backed ETF, the iShares Silver Trust (SLV - Free Report) , posted almost $1 billion in inflows on Jan 29, according to data from BlackRock. This represents the biggest one-day rise since the ETF started trading in April 2006.

Given the optimism and intense buying pressure on silver, investors have a long list of ETF options to watch out for. Below we have highlighted some of them. Each of these ETFs has a Zacks ETF Rank #3 (Hold).

iShares Silver Trust (SLV - Free Report)

The fund offers exposure to the day-to-day movement of the price of silver bullion. It is a ultra-popular silver ETF with AUM of $14.6 billion and heavy volume of 27.5 million shares a day. It charges 50 bps in fees per year from investors (read: 10 Most-Heavily Traded ETFs of Q4).

Aberdeen Standard Physical Silver Shares ETF (SIVR - Free Report)

This fund has AUM of $896.5 million and trades in a good volume of around 756,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses. Expense ratio is 0.30%.

Invesco DB Silver Fund (DBS - Free Report)

This product provides exposure to the silver futures market rather than spot market and tracks the DBIQ Optimum Yield Silver Index Excess Return index, before fees and expenses. It is unpopular and illiquid with AUM of $25.1 million and an average daily volume of about 3,000 shares. DBS is a high-cost choice in the silver bullion space, charging investors 79 bps in fees per year.

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. Hence, silver mining ETFs are outperformers. We have highlighted them below:

Global X Silver Miners ETF (SIL - Free Report)

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 42 stocks in its basket with double-digit concentration on the top three firms. Canadian firms take the largest share at 56.4%, while Russia and the United States round off the next two spots. The fund has managed assets worth $1.1 billion and trades in a good volume of about 553,000 shares a day. It charges 66 bps in annual fees (read: Profit from These ETFs on Silver's "Short Squeeze" Buzz).

ETFMG Prime Junior Silver ETF (SILJ - Free Report)

SILJ provides direct exposure to the silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 50 stocks in its basket with higher concentration on the top three firms. Canadian firms take the lion’s share at 73.5%, while the United States and Peru take the remainder. The fund has managed assets worth $659.3 million and trades in a good volume of nearly 1.5 million shares a day. It charges 69 bps in annual fees.

iShares MSCI Global Silver Miners ETF (SLVP - Free Report)

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 31 stocks in its basket with Canadian firms making up the lion’s share at 61.4% while the United States round off the next spot with double-digit exposure. SLVP has AUM of $243.7 million and an average daily volume of about 212,000 shares. It charges 39 bps in annual fees.

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