The total sales of silver bullion by the U.S. Mint have hit a 26-year high of 4,588,000 ounces in January — and the month is only a little more than half over. According to a report from the website Commodity Online, sale of silver coins in the United States is booming despite a drop of approximately 8% in the price of silver so far in 2011.
Still, this comes after silver surged over 80% in 2010 and has more than doubled in the last three years.
To be certain, robust sales of physical silver via U.S. Mint-issued coins speaks to the tremendous demand the investing public still has for silver bullion. But rather than running out and buying a batch of silver coins, it is much easier to click a mouse a few times and buy an exchange-traded fund (ETF) tied to the fortunes of the precious metal.
Fortunately for investors, there is no shortage of silver sector ETFs to choose from. In fact, there are several heavily traded funds in the space that let investors gain exposure to both the spot price of silver, as well as companies that extract silver from the ground. For real silver bulls, there’s an ETF that delivers twice the performance of the spot price of silver. For silver bears, there’s also the option of betting against the metal with leverage.
The most basic silver ETF is the one closest to actually owning silver coins. It’s the iShares Silver Trust (NYSE: SLV), which is a fund pegged directly to the spot price of silver bullion. The fund is cheap to own too, as its expense ratio is a mere 0.50%. This bread-and-butter silver bet is the one to own for investors who want some basic exposure to the fate of the precious metal.
Another way to play silver is via silver mining stocks, and for that investors should look to the Global X Silver Miners ETF (NYSE: SIL). There was a big spike in silver mining stocks from late-July to the end of December where SIL ran up almost 100& in about 5 months. However, the sell-off that’s taken place so far this year has taken its toll.
Investors who suspect the 2011 action in the sector is just a little profit taking before the next leg up can double down on their bets with the ProShares Ultra Silver (NYSE: AGQ). This ETF employs leverage in its quest to deliver performance equal to twice the silver bullion spot price. If you’re decidedly bullish on silver’s future, then AGQ is a way to put your money where your mind is.
Of course, there’s a flipside to the leveraged silver coin. Investors who suspect the recent selling is a harbinger of more tarnish on the sector, then an aggressive bet based on that notion is the ProShares UltraShort Silver (NYSE: ZSL). This is a leveraged, inverse ETF designed to deliver twice the inverse performance of the silver bullion spot price. Basically, ZSL allows silver bears to double down on any slide in the metal.
The bottom line here is that bullish or bearish on silver; ETFs afford investors a much easier way to bet on the fate of the precious metal.
As of this writing, Jim Woods did not own a position in any of the stocks or funds named here.
