Silver ETFs outshining gold in 2010


Markets are CLOSED: December 05, 2010 12:01 PM ET – MarketWatch Databased News

BOSTON (MarketWatch) — Silver isn’t just good as gold — it’s doing even better.

Exchange-traded funds tracking silver have outperformed gold ETFs in 2010 with gains topping 70%, even though the yellow metal tends to hoard the headlines.

Gold may be far more expensive by the ounce, but in percentage terms, silver prices have jumped more than twice as much so far this year.

The iShares Silver Trust rallied last week and is up more than 70% for year-to-date. The ETF holds nearly $10 billion in assets, according to manager Blackrock Inc. .

The largest gold ETF, SPDR Gold Shares, has gained about 28% thus far in 2010.

"Silver is more volatile than gold," said William Rhind, strategic director at ETF Securities. "When metals prices rise, silver outperforms gold because it has more volatility to the upside."

Following a virtually uninterrupted march higher since the summer, silver prices bounced around within a wide range last month. Since the beginning of November, iShares Silver Trust has traded between $24 and almost $29 a share.

After the November correction, the latest leg higher has revived concerns that gold and silver are in a bubble. See Commodities Corner on the rally in gold and other metals.

The ProShares Ultra Silver has rocketed more than 150% so far this year, although the leveraged ETF is designed for trading rather than buy and hold. It aims for 200% of the return of silver prices, but on a daily basis.

Silver is a "hybrid" metal that has store-of-value appeal like gold combined with industrial applications, said Rhind at ETF Securities, which oversees the nearly $400 million ETFS Physical Silver Shares .

Despite the recent spike, silver prices are still well below the nominal record high of almost $50 an ounce seen in 1980 when the Hunt brothers tried to corner the market.

The list of top ETF performers in 2010 is dominated by silver products. Other options include PowerShares DB Silver Fund, Global X Silver Miners ETF , UBS E-TRACS CMCI Silver Total Return and Sprott Physical Silver Trust.

Meanwhile, ProShares UltraShort Silver is a leveraged ETF designed to profit when silver prices fall. These supercharged ETFs can see huge swings tracking what is already an extremely volatile commodity in silver.

Some of the precious-metals products are structured as exchange-traded notes, which carry issuer credit risk. Within ETFs, some hold the physical metal, while others invest in futures contracts or in the equity markets through miner stocks. These differences can affect how capital gains are taxed.

The proliferation of metals ETFs has made it much easier for individuals and funds to invest in these markets, although it’s difficult to pinpoint how much ETFs have fueled the rally.

A mutual-fund manager in China recently said it has been the first to be cleared to invest in foreign gold ETFs. See full story on China and gold ETFs.

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Published in: on May 11, 2011 at 1:08 am  Leave a Comment  

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