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Silver ETFs Surging With Metal Prices

Sumit Roy

Up 18% so far this year, few assets are outperforming gold in 2016. There is one, however, that managed to outpace even that stellar gain: silver. Following a surprising jump this week, the gray metal is now up 22% on the year.

Likewise, the physically backed iShares Silver Trust (SLV | A-99), which has $5.4 billion in assets, also gained 22% in the period.

Just as with gold, it's been a rough ride for silver since 2011. But something suddenly changed early this year, when prices bottomed out just below $14. Today they reached more than $17, the highest level in about 11 months.

YTD Returns For Gold & Silver

A weaker dollar, a resurgence in commodities across the board, and a new paradigm of negative interest rates around the world have all served to bolster the appeal of gold, and by extension, silver.

The cheaper metal often rides the coattails of its more prominent cousin, and is a favorite of retail investors in particular.

ETF Options

Currently, there are nine ETFs focused on silver in the market and another three focused on silver miners.

SLV is by far the most popular fund tied to silver on the market. That's followed by the ProShares Ultra Silver ETF (AGQ), with $294 million in assets; the ETFS Physical Silver (SIVR | A-100), with $292 million; and the VelocityShares 3X Long Silver ETN (USLV), with $154 million.

SIVR is a physically backed ETF like SLV. However, it is the cheaper alternative, with an expense ratio of 0.30% compared with 0.50% for its larger competitor. Year-to-date, SIVR is slightly outpacing SLV, with a gain of 22.3% compared with 22.1%.

Meanwhile, AGQ and USLV are leveraged products designed for aggressive short-term traders with an appetite for higher risk. As is typically the case, buyers of these products must contend with the effects of daily rebalancing, which could skew their returns from the advertised leverage factors for longer holding periods.

AGQ is up 45.6% for the year so far, while USLV is up 70.6% in that period.

YTD Returns For SLV, SIVR, AGQ, SLVU

Skyrocketing Silver Miner ETFs

In terms of miner ETFs, there is only one focused on silver miners specifically with more than $100 million in assets. That is the Global X Silver Miners ETF (SIL | C-84), with $230 million in AUM.

SIL's focus on silver miners has given it a leg up on larger ETFs tied primarily to gold miners, such as the Market Vectors Gold Miners ETF (GDX | C-73). This year, SIL returned 79.7%, outperforming the 69.9% gain in GDX.

However, SIL isn't the top-performing silver miner ETF―not even close. That title belongs to the PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF (SILJ | F-61), which surged 139.3% year-to-date.

YTD Returns For SIL, SLVP, SILJ, GDX

In fact, SILJ's stellar return makes it the top-performing of all nonleveraged ETFs this year. Not many investors benefited from that gain, however, as the fund only has $18 million in assets.

SILJ’s focus on small- and micro-cap silver miners and explorers makes it appropriate only for the most aggressive silver bulls. Its portfolio is about 90% invested in Canadian companies and has a weighted average market cap of $400 million.

Contact Sumit Roy at sroy@etf.com.

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