As financial markets fret and stocks fall over the latest Eurozone Summit challenges, precious metals are back in their comfort zone — moving opposite to equities. While the glitter of rising gold prices (above $1,723 per ounce Wednesday) is eye-popping, don’t dismiss the shine of silver (over $33). And silver exchange-traded funds (ETFs) are a convenient way to gain exposure to the precious metal.
Gold and silver traditionally have been safe havens in tough financial times, providing a hedge against inflation. The 200-point drop in the Dow on Tuesday was accompanied by rising prices of both precious metals. Gold and silver continued to trend higher Wednesday on fears stoked by the second summit in four days to resolve the European debt crisis. Barclays predicted that strong physical demand would support gold and silver prices in the coming months “amid the seasonally strong period for consumption.”
Why buy silver? It’s a less expensive play than gold that still hedges against inflation, it offsets the portfolio impact of a weak dollar and there’s strong industrial demand for the metal. Why choose ETFs over physical silver? They’re far more liquid than physical silver because ETFs trade over an exchange — just like a stock. You also don’t have to worry about expenses like delivery, storage and security. It’s also more affordable: The cash commitment to a gold or silver ETF is less expensive than stockpiling the physical metal.
Even so, not all silver ETFs are alike. Some ETFs are backed by physical silver bullion, others seek to mirror silver futures contracts and yet others track stocks of mining companies. In these increasingly uncertain times, here are three silver ETFs — one of each — that deserve a closer look:
ETFS Physical Silver Shares
Shares in the ETFS Phsyical Silver Shares Trust (AMEX:SIVR) are backed by physical silver bullion. At $33.15, SIVR has gained 8.24% during the past month. With a market cap of $649.74 million, the fund has a one-year return of 42.89%. SIVR shares are trading nearly 33% below SIVR’s 52-week high of $49.28 in May.
PowerShares DB Silver ETF
Shares of the PowerShares DB Silver ETF (AMEX:DBS) track a rules-based index composed of futures contracts on silver. At $58.11, DBS has gained 8.01% in the past month. With a market cap of $104.6 million, the fund has a one-year return of 41.31%. DBS shares are trading 33% below the 52-week high of $86.98 in April.
Global X Silver Miners ETF
Shares of the Global X Silver Miners ETF (AMEX:SIL) track the price and yield performance of the Solactive Global Silver Miners Index. At $23.59, SIL has gained 5.93% in the past month. With a market cap of $336.4 million, the fund has a one-year return of 24.14%. Shares are trading nearly 25% below the 52-week high of $19.05 in April. Global X Silver Miners also pays a dividend, with a current yield of 1.02%.
As of this writing, Susan J. Aluise did not hold a position in any of the funds named here.