Time To Consider Investing In Silver

Jun. 18, 2013 8:10 AM ETAGQ, CDE, HL, PAAS, SLV, WPM8 Comments
Harlan Kessler profile picture
Harlan Kessler

Investors in silver have not had a great experience this year, seeing a decline of over $5 billion in the value of their holdings. A survey by Bloomberg in December showed that investors expected silver to be one of the star investments of 2013 with a return of 33 %. However, the 28% decline in prices to approximately $21.80 per ounce is the worst performance on record since 1984 and, though analysts expect a rebound by December 2013, the decline for the year would still be in excess of 20%. As a matter of interest, the decline in silver prices is more than the 18% decline in gold prices (the worst performance since 2000).

Earlier, analysts had expected silver prices to rise because of the inflation protection it provides during times of global uncertainty as well as increasing economic growth leading to a pickup in industrial demand. However, the slump in gold prices and low inflation has taken much of the shine off silver. Silver is now caught up in no man's land between being an industrial metal and a precious metal and only global economic growth can strengthen its position as an industrial metal.

Investment in silver ETFs

iShares Silver Trust (SLV) tries to accurately mirror the price movements of physical silver and the price is pretty accurately correlated. In fact the ETF price is down this year by approximately the exact same as the decline in silver prices. The only asset that the fund invests in is physical silver bullion.

On the other hand, ProShares Ultra Silver (AGQ) uses forward contracts and derivatives to magnify the impact of price movements and aims at a 2:1 ratio between the price of the ETF and the price of silver. It does not always achieve this ratio and, because the investment is

This article was written by

Harlan Kessler profile picture
Harlan currently works as a Research Associate specializing in Investment Communications. Prior to his current role, Harlan spent seven years in investment management. The first two years were spent creating portfolios for retail investors, followed by five years in Market Risk for a major global bank Harlan earned his Bachelor's degree in Economics followed by a Master's degree in Urban and Regional Economics

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