The Bullish Case for Silver ETFs

by: Tom Lydon

Silver has long lingered in gold’s more gleaming shadow, yet it’s been outperforming the yellow metal year-to-date. Here's why silver presents a more bullish case than gold, as well as which exchange traded funds (ETFs) can help you take advantage.

J. Edwards for Minyanville gives us a few reasons why silver could re-stock your portfolio:

  • The gold-to-silver ratio: The gold-to-silver ratio tells us how much silver it would take to buy one ounce of gold. Since 1840, it has ranged between 1:15 to 1:97. Right now, the ratio sits around 1:63. Many analysts believe that this ratio is currently out of whack and will return to historical levels. To do so, though, would require a substantial rise in silver’s price.
  • Inflation: Just as gold is a great inflation hedge, so is silver, which has been called the “poor man’s gold.” The dollar has lost more than 98% of its value, and as the dollar continues to slide, silver can help protect and increase wealth.
  • Increasing silver investment and demand: Worldwide mining production totaled only 680 million ounces, creating a 208 million ounce deficit. Many people don’t know that silver is the most used commodity in industry next to oil, and as industrial demand picks up, so will the demand for silver.
  • It’s affordable: Let’s face it. The largest gold ETF, SPDR Gold Shares (NYSEArca: GLD) is around $115 a share. The largest silver ETF, iShares Silver Trust (NYSEArca: SLV), is around $18 a share. If you’re feeling priced out of the gold market – and many are – it may spark a return to silver.
  • There’s less of it to go around: In the 1950s, the United States had a stockpile of 3.5 billion ounces of silver, the largest in history. World stockpiles dwindled down to 300 million ounces by 2007 as most of it was sold off or consumed. Meanwhile, demand has only increased. The stage has been set for a shortage.

These are just a few of the reasons why silver may be a compelling investment if you’re looking for a precious metal allocation in your portfolio.

  • iShares Silver Trust (NYSEArca: SLV)
  • ETFS Physical Silver (NYSEArca: SIVR)
  • PowerShares DB Silver (NYSEArca: DBS)
  • Global X Silver Miners (NYSEArca: SIL)
  • PowerShares DB Precious Metals (NYSEArca: DBP): Silver is 20%, gold is 80%