The precious metals rally has decidedly begun and this process started somewhere around the end of the last year with most metals gaining on their prices. 2013 or at least the first half of it seems to be giving out hints of stability for the stock indices and risk appetite is clearly back along with a beaten up American dollar.
Apart from an enhanced investor activity, it is a huge gap between supply and demand numbers that give more than one good reason for investing in Silver in the New Year. Investors' wealth attains a natural immunity to lop-sided fiscal and governmental policies and gains follow owing to an unbalanced demand and supply dynamics. Almost all silver supply is consumed in industries, jewellery making, coins, medallions, photography and investment demand (such as hedge and commodity funds) and the producers are under constant pressure due to rising demands.
The silver demand has been constantly outperforming the supplies since 2007. In 2011 alone the demand grew 2% more than the production.
It is but a fact that in next decade or two, the shiny metal may be unavailable to most of us and definitely very expensive. The markets are more than ready to factor in this exclusivity much sooner than that and tactical silver investments may emerge as this year's game changer for most vested portfolios.
Silver has proved an exceptional 123% gain in five years. Therefore it is seen projecting greater profits than its big brother Gold.
The purest investments arise from its multifarious industrial uses as the white metal especially gets a boost in a strong economic environment. A pure play on Silver means entering the high risks futures market products that are backed with the physical metal. Although a pure play on the asset, but the commodity investments mostly shoo away the conservative beings as the single determinant in this case is the fundamental price of the commodity.
Silver Mining Fund on the contrary, offer a direct exposure to equities/ADRs of some of the biggest silver mining and exploration companies of the world. For a more conservative and non-chancy investment method, an individual can capitalize on solid mining stocks. Pre entry strategy should include reviewing factors such as the current price range in the commodity exchanges and the overall mood of the stock market as these stocks could be well under pressure if the capital market is reflecting a poor sentiment notwithstanding the price of silver that could very well be encouraging.
Apart from the lower risks that is associated with the equity traded funds, schemes attuned to the movement of Solactive Global Silver Miners Index enable an asset kitty that include large caps, mid caps and even bounty gainers from the mining and exploration industry. The benchmark comprises of 32 stocks and 85% weighting is towards United States and Canada. Minority of stocks have their listings exclusively in London, Mexico and Australia.
Naturally, the strongest investment case for the miners is their past performance where most Silver mining shares, when in rally, have constantly beaten the physical metal and the benchmark itself in terms of returns on investment. The current year and the projected upsides should replicate the triple figure gains that one tends to associate with long term oriented Silver investments. Unless a brand new global turmoil equalling the magnitude of the Euro crisis appears, broader markets and the relevant benchmark for the foreign investor should also follow the same suite.
The Global X Silver Miner ETF [SIL] comprises stocks of companies engaged in mining, refining and exploration work of the metal. Investing in Silver follows the name sake Solactive Index and charges yearly after the expenses as per 0.65 basis points. Industrias Penoles CP, Silver Wheaton Corporation and Fresnillo PLC are the top three stocks, sharing 38% of the total assets of the Global X Silver ETF.