Silver's Crucial Role in a Clean Energy Future | ETF Trends

There are myriad reasons to be bullish on silver and related assets like the Sprott Physical Silver Trust (NYSEArca: PSLV).

The asset is a closed-end fund that lets investors redeem large blocks of shares in exchange for delivery of silver bullion. Adding to the case for PSLV is silver’s durability during the worst of the coronavirus pandemic and expectations that it will perform well when COVID-19 is defeated.

A major, longer-ranging catalyst for PSLV and silver prices is the metal’s role in the booming renewable energy industry.

“As clean energy initiatives gain traction, greater attention is being paid to the critical roles of various metals and minerals,” writes Sprott portfolio manager Maria Smirnova. “Access to these valuable materials has become critically important, which is why several resource-rich nations, including Canada and Australia, have joined the United States in establishing the Energy Resource Governance Initiative (ERGI), an alliance to disseminate best practices for discovering and developing reserves of minerals used to make electric vehicles.”

PSLV 1 Year Performance

PSLV: Silver Strength in the Past, Present, and Future

The outlook is encouraging, and that could lure more investors to PSLV, which is one of the more compelling silver funds on the market today.

“Silver plays a critical role in all ‘green revolution’ discussions,” notes Smirnova. “Although renewable power generation and battery storage technologies may conjure visions of cobalt, lithium and nickel, we would argue that silver plays an even more fundamental role across many green energy technologies.”

The fund has some other benefits too.

PSLV “offers a potential tax advantage for certain non-corporate U.S. investors. Gains realized on the sale of the Trust’s units can be taxed at a capital gains rate of 15%/20% versus the 28% collectibles rate applied to most precious metals ETFs, coins and bars,” adds Sprott.

Lastly, silver is a clear play on the rise of electric vehicles.

“Silver’s superior electrical properties make it hard to replace across a wide and growing range of automotive applications, many of which are critical to safety and to meeting increased environmental standards. Silver is found in many car components throughout vehicles’ electronic systems,” concludes Smirnova.

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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.