Silver ETFs: What's Next as Demand Grows but Supplies Dwindle

Silver exchange traded funds are on a torrid pace this year and as is often the case with gold and gold miners ETFs, silver miners funds are outpacing physically-backed silver ETFs in a big way. For example, the iShares MSCI Global Silver Miners ETF (NYSEArca: SLVP) hit a 52-week high on Monday and has nearly doubled in value this year.

There is a growing number of silver market observers that believe the metal has more significant upside ahead. Investors have previously turned to silver exchange traded funds as an asset with a safe store of value and as a metal with wide industrial application in a growing economy. However, the precious metal is now suffering from a bad turn on both fronts.

On the supply side, silver miners are finding less deposits and producers are expanding into new projects, which suggests that silver could be in shorter supply ahead.

What could drive more upside for the likes of SLV and SIVR is a familiar catalyst for commodities: Growing demand and dwindling supply.

The gold/silver ratio also indicates the white metal is undervalued relative to its yellow counterpart, meaning there is room for big upside ahead for silver and silver miners ETFs.