Silver exchange traded funds have more than doubled the return of gold prices so far this year. Smaller investors are turning to silver, which is cheaper than gold per ounce, to hedge against inflation and market volatility.
The largest silver ETF, iShares Silver Trust (NYSEArca: SLV), is up about 30% in 2011, while SPDR Gold Shares (NYSEArca: GLD) has climbed nearly 13%.
The precious metals ETFs were rising in Monday’s premarket after leaders in Washington failed to reach a deal on raising the U.S. debt ceiling over the weekend. Also, Moody’s slashed Greek’s debt rating further into junk territory. [Dollar ETFs in Focus as U.S. Debt Talks Falter]
Silver is trading over $40 an ounce and seeing rising investor interest. Myra Saefong for MarketWatch reports that the world investment demand for silver is at 279.3 million ounces, up 40% since 2009, according to data from GFMS research consultancy. [Will Silver ETFs Continue to Shine?]
Silver is gaining popularity with investors as it is proving to be a leveraged play on gold. [Precious Metals ETFs Rise on Debt Woes; Gold tops $1,600.]
“Silver is always more volatile than gold, both up and down,” said Adrian Ash, head of research at BullionVault.com. “For investors looking to play off or defend monetary mayhem, silver or gold will better appeal depending on risk appetite and long-term aims.”
Silver is also known to be more sensitive to the economy as it has some industrial applications. [Silver ETFs Jump After Moody’s Warning on U.S. Debt.]
“If you believe that the worst thing we will have now is massive inflation from all of the monetary printing, silver will be a fantastic buy, ” said James Carillo, account executive at Precious Metals investment firm of Swiss America Trading Corp. Yet, “if you believe there will be another stock market meltdown, I would wait on silver.”
Other ETFs for silver include ETFS Physical Silver Shares (NYSEArca: SIVR) and PowerShares DB Silver Fund (NYSEArca: DBS).
ETFS Physical Silver Shares
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SLV and GLD.