The iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR), two of the largest ETFs backed by holdings of physical silver, are lagging their gold counterparts this year, but the white metal could gain some much needed momentum as supply shortages arise due to the coronavirus.
To help shore up the economy, the U.S. Federal Reserve is on an asset-buying bonanza, which includes scooping up securities to keep the markets afloat.
Silver is believed by many investors to be inversely correlated with interest rates. Rising interest rates make bonds and other fixed-income investments more attractive so that the money will flow into higher-yielding investments, such as bonds and money market funds, and out of precious metals, which offers no yield at all during times of higher interest rates, and back into metals ETFs.
“A total of 32 countries have passed partial or complete lockdown orders, leading to the temporary suspension of activities at over 1,600 mines as of April 3, though that number has since dropped down to 729 as restrictions begin to ease in certain areas,” reports Mining.com, citing a GlobalData report.
Silver Can Shine
As long as economic and geopolitical instability continue to rule, there may be more significant precious metals involvement.
Investors can tap silver equities with the Global X Silvers Miners ETF (NYSEArca: SIL) and related ETFs. 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.
“The exempted mines are, however, still operating with reduced numbers of workers to minimize the potential spread of the virus, which is causing a slow return for an industry that has already seen production hit by restrictions,” according to Mining.com.
Traders looking to amplify gains with silver can be considered geared products, such as the VelocityShares 3x Long Silver ETN Linked to the S&P GSCI Silver Index ER (NasdaqGM: USLV) and the ProShares Ultra Silver (NYSEArca: AGQ).
USLV seeks to replicate, net of expenses, three times the S&P GSCI Silver Index ER. The index comprises futures contracts on a single commodity. The fluctuations in the values of it are intended generally to correlate with changes in the price of silver in global markets.
“Among the mining activities affected by COVID-19, silver production has been the biggest victim, with nearly 66% of the world’s annual output still on hold,” according to Mining.com.
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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.