While silver ETFs outperform relative to gold, miners continue to suffer
Silver ETFs have decoupled from the depressing price movements of increasingly hammered listed silver stocks.
Author: Barry Sergeant
Posted: Tuesday , 29 Jul 2008
Amid the hammering of listed resources stocks over the past two months, and the more recent heavy sell off of commodities, silver exchange traded funds (ETFs), represented mainly by the US-listed iShares Silver Trust, stand out as one of the most resistant commodity-linked securities. An investment in the iShares Silver Trust, which currently holds USD 3.4bn in silver bullion, is an easily accessible proxy investment in silver bullion.
Where an investment in silver ETFs would have returned 33% over the past 12 months, a weighted investment in 43 listed silver stocks is now returning a highly dramatic negative -33% over the same period. Gold ETFs, represented mainly by the US-listed SPRD Gold Trust, have also performed well, with a return of 28%, ranking just behind silver ETFs.
Listed gold stocks, however, have far outperformed listed silver stocks, returning a composite 5% over the past 12 months. The disparities in the returns from listed stocks may at least be partially explained by the declines in spot prices: at USD 919 an ounce, gold bullion is currently 11% off its highs, while at USD 17.23 an ounce, silver bullion has fallen by 19%.
Both gold and silver bullion are favoured by certain specialist investors as high beta investments during times of crisis or trouble. The two metals traded at record highs during March this year, when Wall Street's Bear Stearns crisis peaked. While both gold and silver are ranked as precious metals, along with the platinum family, gold has a demonstrable monetary role, something arguably absent from the rest of the precious metals peer group.
Primary silver producers are far less easy to find than primary gold producers. The silver sub-sector is led by Fresnillo, Pan American Silver, Polymetal, Hochschild, Coeur d'Alene and Hecla, and the fast-rising Silver Wheaton. Most of the world's silver is produced as byproduct, typically by the larger mining names...
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