Why Silver’s The Hottest Trade In The Market

July 01, 2014

Trio of factors pushing up the white metal.

Silver

A quick look at last month's winners and losers yields an unlikely trio of crazy high fliers: silver miners.

The hottest of the bunch, the PureFunds ISE Junior Silver (Small Cap Miners/Explorers) (SILJ | F-23), is up more than 30 percent just in the month of June, pushing its six-month year-to-date performance more than 48 percent. It's been trailed closely by the Global X Silver Miners (SIL | B-74) and iShares MSCI Global Silver Miners (SLVP | D-99) ETFs.

What's going on here?

  • The price of silver has been rising twice as fast as the price of gold. In June alone, silver rose almost 10 percent to $21.03 an ounce. Gold, by contrast, rose just more than 5 percent.
  • Silver is rallying from both safe-haven demand in the wake of continued Middle-East turmoil, and because it's actually a useful, functional industrial metal that should see increased demand in an improving economy.
  • Investors seem to have shrugged off the collapse of the London Silver Fix, and the ETFs themselves seem to be the best real-time indicator of fair value on the metal. Miners provide an indirect—and riskier—way to access silver's long-term prospects.

A word of caution, however—the winner here, SILJ, isn't particularly liquid, and often trades at significant premiums or discounts, and invests in the riskiest edge of the silver miner market—small- and microcaps.

 

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