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ETF Of The Week: Big Flows Into Silver Fund

Lara Crigger

Investors are betting big on silver.

Over the past month, more than $623 million of new net investment assets have flowed into the iShares Silver Trust (SLV). Prior to that, only $45 million had entered the fund year to date.

Most of that money has come in the past two weeks, and trading volume in the fund has spiked as a result. On average, SLV trades about 12.3 million shares daily. Since July 15, however, an average of 31.7 million shares have traded daily.

Likely the sudden interest in SLV reflects investors' expectations that the Fed will cut rates at its meeting next week. When interest rates are low, gold and silver prices tend to rise, because the precious metals act as a store of value.

Rise they have: SLV has spiked 6.9% over the past month, well outpacing the SPDR S&P 500 ETF Trust (SPY), which has only risen 1.3%:

 

Source: StockCharts.com; data as of July 25, 2019

 

Dual-Purpose Metal

The SPDR Gold Trust (GLD) has also seen outsized inflows, bringing in $1.1 billion in new net money over the past month.

However, silver has the added benefit of offering exposure to industrial trends; the metal has a range of applications in medical technology, automotive parts, even solar panels.

Yet those industrial applications could spell trouble for SLV in the future should the global economy slow—s many economists are now predicting—and crimp silver's industrial demand.

Another source of downward pressure on SLV would be if the U.S. dollar continued to strengthen. When the greenback is strong, precious metals become less attractive as a store of value.

SIVR vs. SLV

SLV is one of only four exchange-traded products to directly track the price of silver, and one of two to track silver bullion. The other physical silver fund is the $368 million Aberdeen Standard Physical Silver Shares ETF (SIVR).

The two ETFs are remarkably similar, but with an expense ratio of 0.30%, SIVR is 20 basis points cheaper than SLV. However, SLV's robust volume and deep liquidity can't be beat, making it the more optimal trading play.

Over the past month, SIVR has seen just $8 million in new net inflows.

Contact Lara Crigger at lcrigger@etf.com

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