Luster Restored? Silver ETFs Keep on Shining

August 15th at 7:30am by Tom Lydon

The iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) have endured miserable performances this year as each is down 28.2%. That is a year-to-date statistic and that is important to note because silver bulls are finally getting some relief as the white metal has set a scorching pace since the start of the third quarter.

Since the start of July, SLV and SIVR have each surged 11.2%. In the past month, the returns for each are 9.2% as investor sentiment toward the white metal has improved. Physical demand for silver remains robust and that could serve as a catalyst for further upside for SLV and SIVR.

“US mint sales of silver coins reached a fresh record at the end of July on a cumulative 12-month basis (see chart below). Bargain hunters appear to have been waiting in the wings in a similar fashion to 2008 (see chart). In 2008, silver fell about 50% from US$20/oz. to US$10/oz. subsequently rallying back to US$20/oz. by the end of 2010 as US Mint silver sales reached new records,” according to ETF Securities. [Silver ETFs Shine on Sentiment Shift]

There are other statistics that support a near-term bull case for silver. SLV’s physical holdings rose to a four-month high on Tuesday, rising nearly 60 tonnes, or 0.6%, to 10,454 tonnes, reports Frank Tang for Reuters. UBS expects holdings in major silver ETFs around the world to increase by 10 million ounces (311 tonnes) in 2013, according to Reuters.

UBS is not the only bank or research house with a bullish view on silver. “Metals prices have rallied sharply over the past week, including both industrial and precious metals. We think the rally may be an early indication of an intermediate-term turnaround, according to our technical indicators, and would consider building exposure. We like gaining exposure to silver by buying SLV outright or via November call spreads,” said MKM Partners in a research note obtained by Barron’s.

However, there are some tepid assessments of silver. HSBC said earlier this week it expects silver to trade in a range of $17 to $23 per ounce “for the remainder of 2013, thanks to the rising supply of the metal, the dampening effect of Fed policy shifts and weaker demand from ETFs.”

Based on Wednesday’s closing price of $21.09 for SLV, a move to $23 implies upside of about 9%. Investors looking for some more bang for their respective bucks can try the double-leveraged ProShares Ultra Silver (NYSEArca: AGQ).

iShares Silver Trust

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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