Grab This Mining ETF as Silver Demand Grows, Supply Diminishes

Silver prices may still be caught in downdraft thanks to a stronger dollar, but increased demand and less supply could help boost prices heading into 2022.

2021, for the most part, brought a risk-on sentiment back to the markets, giving investors more reason to prefer equities over precious metals. However, silver still held onto its strength in 2020, overall.

“Fueled by 2020’s demand surge, 2021 saw silver hold above US$20 per ounce for the first time since 2014,” an Investing News article says. “But while investment positivity kept the white metal from sinking below US$21, broader market uncertainty and concern over industrial demand kept silver rangebound below US$28 for the year.”

“Silver was also boosted by the ongoing robust rally in base metal prices as the global economy came back to life. As sentiment turned positive for silver, COMEX positioning and ETP holdings also improved with the net managed money long jumping by 75 percent in April,” an annual “Precious Metals Investment Focus” report from Metals Focus notes.

Silver Price Chart

Getting Silver Miner Exposure

Investors sensing an opportunity to get silver exposure at a value prices can give ETFs like the Global X Silver Miners ETF (SIL) a closer look. SIL seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global Silver Miners Total Return Index.

As consumer prices start to rise, silver can potentially serve as an ideal inflation hedge despite the current price weakness. This only opens up opportunities for investors to buy silver on the dips.

Overall, SIL gives investors:

  • Targeted exposure: SIL is a targeted play on silver mining.
  • ETF efficiency: In a single trade, SIL delivers efficient access to a basket of companies involved in the mining of silver.

A boost in mining activity this year was the result of operations returning to full capacity.

“This recovery is largely the result of most mines being able to operate at full production rates throughout the year following enforced stoppages in 2020 due to the pandemic,” the Silver Institute’s review notes.

“Meanwhile, strong silver and by-product metal prices this year have improved profitability in the silver mining sector despite rising input costs,” the report adds. “Average margins in the industry are currently at their highest since 2012 and only 5 percent of global primary silver mines were operating with costs above the silver price in the first half of the year.”

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