Silver has been on a stellar ride with prices climbing to the highest level in nearly four years as the white metal continues to catch up to gains of its sister metal gold. Notably, the precious metal has climbed 68% since mid-March.
Increase in investment demand, pick-up in industrial demand due to factory reopenings, and investors’ appetite for alternatives to gold and government bonds led to the rally. Notably, silver is used in a wide range of industrial applications. About 50% of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers (read: 2 Top Sectors of Q2 & Their Top ETFs).
The uncertainty over trade and coronavirus crisis has compelled investors to move toward silver, which is regarded as a store of wealth and an alternative investment to risky assets. Further, the massive liquidity injections by the Fed along with exceptionally low interest rates globally will put pressure on the U.S. dollar and boost dollar-priced commodity prices in the second half of 2020.
According to the president and chief executive officer at GoldSeek.com, there has been a historically high purchase of physical silver via silver exchange-traded funds in the past few months alone. As of Jun 30, global holdings of silver in silver exchange-traded products reached a “fresh all-time high of 925 million ounces, which is roughly 14 months of mine supply,” according to a recent report from The Silver Institute. ETP growth in the first half of 2020 of 196 million ounces “comfortably surpassed” the highest annual inflow of 149 million ounces set in 2009, the report said.
Moreover, the ongoing growth in the global solar PV industry, a rebound in global computer shipments, and new sources of demand for sensors used in IoT and OLED lighting will continue to boost to silver demand (read: ETFs Ways to Tap the Rise in Silver Price).
Given the optimism and intense buying pressure on silver, silver mining industry has been thriving. Acting as a leveraged play on the underlying metal prices, the metal miners tend to experience more gains than their bullion cousins in a rising metal market. As such, we have highlighted three ETFs and stocks that could be excellent plays for investors who believe that silver will continue to move higher.
iShares MSCI Global Silver Miners ETF SLVP – Up 29.1%
This fund follows the MSCI ACWI Select Silver Miners Investable Market Index, providing investors exposure to companies that derive the majority of revenues from silver exploration or metals mining. It holds 29 stocks in its basket with Canadian firms making up the lion’s share at 65.9%. The United States, South Africa and Mexico are some of the other top countries. SLVP has AUM of $163.8 million and average daily volume of about 161,000 shares. It charges 39 bps in annual fees.
Global X Silver Miners ETF SIL – Up 19.4%
This product provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 28 stocks in its basket with double-digit concentration on the top three firms. Canadian firms take the largest share at 52.5%, while Cyprus, Mexico and South Korea round off the next three spots. The fund has managed assets worth $739 million and trades in a good volume of about 442,000 shares a day. It charges 66 bps in annual fees.
ETFMG Prime Junior Silver ETF SILJ – Up 3.2%
SILJ provides direct exposure to the silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 48 stocks in its basket with higher concentration on the three firms. Canadian firms take the lion’s share at 69%, while the United States and Peru round off the next two spots with double-digit exposure. The fund has managed assets worth $310.3 million and trades in good volume of nearly 826,000 shares a day. It charges 69 bps in annual fees (read: Top ETF Stories of 1H Likely to Rule in Second-Half 2020).
Avino Silver ASM – Up 40.3%
This company is engaged in exploration and development of mineral properties. It primarily explores for silver along with gold, copper and lead. The stock has a Zacks Rank #2 (Buy) and VGM Score of C. Avino Silver has a market cap of $62.6 million.
Pan American Silver Corp. PAAS – Up 36.8%
This mining company is focused exclusively on silver. With a market cap of $6.8 billion, it has a Zacks Rank #3 (Hold) and VGM Score of C (see: all the Materials ETFs here).
Fortuna Silver Mines Inc. FSM – Up 23.3%
It is engaged in the exploration, mining and development of silver and base metal properties in Latin America. Fortuna Silver has a Zacks Rank #3 and VGM Score of F. It has a market cap of $924.5 million.
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