The Global X Silvers Miners ETF (NYSEArca: SIL) and the PureFunds ISE Junior Silver Small Cap Miners/Explorers ETF (NYSEArca: SILJ) were two of 2016’s best-performing non-leveraged ETFs. In fact, SILJ more than doubled last year, making it the best-performing leveraged ETF.
However, much of investors’ enthusiasm for silver and the aforementioned miners ETFs waned in 2016’s latter stages as the dollar gained momentum and investors fretted about the specter of an interest rate hike by the Federal Reserve, a scenario that came to pass in December. Good news: SIL and SILJ have their momentum back to start 2017.
Silver and other precious metals enjoyed safe-haven demand as the equities market plunged into a correction. The metal also maintained its momentum as the Federal Reserve lowered its interest rate outlook to only two hikes this year from a previously expected four rate hikes.
“Because silver stocks aren’t widely followed, most investors and speculators are unaware of this sector’s stellar upside potential. Silver mining is a challenging business both geologically and economically, so there aren’t many primary silver miners out there. And their stocks’ collective market capitalization is small, a rounding error compared to the broader stock markets. That doesn’t leave much room for funds to buy,” according to SilverSeek.com.
For its part, SILJ is up 19.5% to start 2017.
SIL, the largest silver miner-related ETF, tries to mirror the Solactive Global Silver Miners Total Return Index, which is also comprised of global silver miners. SILJ tries to reflect the performance of the ISE Junior Silver (Small Cap Miners/Explorers) Index, which is comprised of silver exploration and mining exposure of small-cap companies, such s Coeur Mining (NYSE: CDE), Pan American Silver (NasdaqGS: PAAS) and First Majestic Silver (NYSE: AG).
“This beaten-down sector has much-higher odds of soaring higher than collapsing lower. Before this past year’s young new silver bull, silver stocks were battered relentlessly in the dark years from 2013 to 2015. That spawned such epic bearishness that everyone susceptible to being scared into selling low is long since out,” adds SilverSeek.
For more information on the silver market, visit our silver category.