Will Silver ETFs Be Hit by Commodity Regulations?

Includes: SIVR, SLV
by: Tom Lydon

Many of the precious metals are heating up at the prospects that the economy is in recovery mode, and silver is no exception. Silver is up 26%, which gives the gold related ETFs a run for their market share.

The idea that industrial demand will pick up as the economy recovers has taken silver spot prices to a high of $14.45 an ounce. Gold, on the other hand, has seen a 6% increase in prices, which pales in comparison to silver’s 26%, explains Melissa Pistilli for Silver Investing News.

The latest U.S. ETF that focuses on silver launched last month from ETF Securities, ETFS Silver Trust (NYSEARCA:SIVR). This tool gives cost-effective and transparent exposure to the phsycial metal, without any physical delivery. The SIVR has already hit the $100 million assets mark in only its first month of trading on the NYSE.

ETF Securities is looking at markets in Hong Kong and Singapore for fund listings within the next year and a half. The reaction to the latest Commodity Futures Trading Commission (CFTC) regulations has managers making major changes to their listings.

This year, an investigation into rising wheat prices in 2008 drew the attention of Congress to commodity ETFs. The fear is that commodity ETFs lead to excessive buying that artificially inflates prices. The CFTC is looking at a number of possibilites as to why speculation may be an issue within the commodity markets.

Ian Salisbury for The Wall Street Journal wrote that precious metal fund providers may not have to worry about such regulations, since they don’t hold futures contracts that are currently facing regulation.

  • iShares MSCI Silver Index (NYSEARCA:SLV): up 25.4% year-to-date

  • ETF Securities Silver Trust (SIVR)