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May

2012

PSLV vs. SLV: Battle of the silver ETFs

by Fred Marion

While they’re both silver ETFs, the iShares Silver Trust ETF (NYSE:SLV) and the Sprott Physical Silver Trust ETV (NYSE:PSLV) operate very differently. Here’s how they work:

The iShares Silver Trust ETF: The fund buys and sells silver in an attempt to have it’s share price match the value of its bullion holdings. If the value of the fund’s shares rise, iShares buys more silver. In theory, the fund’s market cap should equate to the fund’s silver holdings (less fees and liabilities).

Sprott Physical Silver Trust ETV: The Sprott trust operates much like the iShares ETF with one major exception, shareholders have the ability to exchange their Sprott shares for physical silver bullion on a monthly basis.

Although they operate similarly, the two ETFs have been on divergent paths year-to-date with the PSLV down 10 percent and the SLV up 4.8 percent. During the same time, the price of spot silver is up 2.54 percent on the year. It’s clear then that while the ETFs are designed to track an underlying commodity, they definitely come with margins of error.

And that’s actually making PSLV look quite attractive. In the past, the fund has traded at a premium of up to 35 percent above the price of spot silver (apparently investors like the fact that their holdings could be exchanged for physical silver). Today, PSLV’s trading at a premium of just 4.95 percent to the silver spot price.

There are benefits to both the ETFs approaches, though. First, the arguments for PSLV:

1) Redemption. Obviously, investors can choose to exchange their shares for physical silver – something that could come in handy if we do experience a currency crisis in the West.

2) Tax perks. If you plan to hold your silver ETF shares for more than a year, you can claim any appreciation as a long-term capital gain. That’s good for a 15 percent tax rate. Profits from SLV will set you back 28 percent under the current tax code.

3) Safety. The Royal Canadian Mint stores bullion for the Sprott trust. As Sprott writes on its web site, “The Mint is a Canadian Crown corporation, which acts as an agent of the Canadian Government, and its obligations generally constitute unconditional obligations of the Canadian Government.” SLV’s bullion is stored and managed by a private company (JP Morgan Chase: NYSE:JPM) with no government backing (unless, of course, you count the tacit promise of a bailout when times get tough).

Now the arguments for the SLV:

1) Low or no premiums. Since SLV doesn’t have to manage the costs associated with fulfilling delivery, the fund’s holdings trade at a much smaller premium to the price of silver. That’s important as premiums are subject to the whims of potential investors. As I wrote above, PSLV has traded with a premium as high as 35 percent above the price of silver in the past. You may as well go buy and store your own bullion at those prices.

2) Higher volume. A lot of silver ETF investors have no intention (or at least they don’t foresee the desire) to redeem their stock holdings for physical silver. For them, buying and selling shares is simply a vehicle to make money. SLV wins out if that’s your goal as the fund is much more liquid than PSLV. On an average day, more than 1.7 million shares of SLV trade hands compared with less than 100,000 shares of PSLV. This makes going both long or short the SLV much easier.

SLV Vs. PSLV: Which one’s better?

Both funds accomplish the same goal: exposure to the spot price of silver without actually buying silver. In the end, then, it comes down to two factors: security and taxes. If you know you’re going to hold your shares for more than a year (which entitles you to tax benefits) and you value the security of knowing your ETF shares can be redeemed for actual silver, buy PSLV. For all other traders, the SLV is perfect.

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Tags: PSLV, Silver ETFs, SLV
Posted in commodities, mining stocks, precious metals, silver coins, silver stocks | No Comments »

Apr

2012

Why the GFMS believes silver will rally after June

by Fred Marion

Despite weakness in the silver market, a leading London-based precious metals consultancy believes we’re setting up to see a spike in silver prices during the second half of 2012.

“Prices are probably going to head higher [in the second half of 2012] and we could see a push above $40 at some point,” though silver is unlikely to sustain those price levels Philip Klapwijk, the Global Head of Metals Analytics at Thomson Reuters GFMS, told Dow Jones Newswires last week. “I don’t think silver has the same get up and go that it did last year.”

Still, Klapwijk intimated that new monetary stimulus from the Fed could lead to a spike in gold and silver prices, and he believes that stimulus is likely in the summer or early fall.

Before that time comes, though, there could be pain. And if gold prices drop below $1,600 an ounce, silver prices could be susceptible to a price plunge.

GFMS, nonetheless, believes monetary stimulus will help silver will sprint higher in 2012. On top of that, they believe industrial demand for silver is strengthening, Klapwijk told Dow Jones. The extreme sell-off in silver late in 2011, probably lead manufacturers to deplete their silver stocks last winter. Those stocks need replenished, and they’ll need replenished this year.

In a separate interview with Kitco News, Klapwijk said he expects silver to trade between a low of $29 an ounce and a high of $42 an ounce.

Investors should also keep an eye on the gold-silver ratio, Klapwijk says. Currently, the ratio stands at 52. GFMS believes it could head higher (as silver weakens), perhaps touching 55. Historically, the ratio has stood around 53:1, but when silver prices warm up later in the year, Klapwijk believes the ratio could fall as low as 45:1.

Not everyone’s so optimistic, though. Steady erosion in the trading volumes for the iShares Silver Trust ETF (NYSE:SLV) has at least one writer arguing that we’re on the cusp of “a reckless close-out” in silver prices.

“(The selloff could be) without precedent in the history of this ETF and perhaps ever in the history of the modern silver trade (though don’t hold us to that),” writes Hugh L. O’Haynew at OakshireFinancial.

Even Citigroup’s gotten in on the action. Last week, they predicted silver prices as low as $27 an ounce by the end of 2013 (check out our post Why Citi says investors should stay away from silver for more).

Gloomy stuff. And a reminder that we shouldn’t over-leverage our bets on any commodity. If you do think silver’s going down, though, there are ways to profit off the decline. One of our favorites is the ProShares UltraShort Silver ETF (NYSE:ZSL). The ETF looks to return twice the inverse of the silver spot price. That means if silver goes down $1, ZSL should go up $2.

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Tags: GFMS, gold-silver ratio, silver price forecast, silver price predictions, SLV, ZSL
Posted in mining stocks, precious metals, silver coins, silver stocks | No Comments »

Aug

2011

Rally in gold prices could still have legs

by Fred Mason

In case you haven’t noticed, the gold market is starting to feel frothy. Over the past month, the SPDR Gold Trust ETF (NYSE:GLD) has risen more than 18 percent while the Dow Jones Industrial Average has tumbled 14 percent.

In a sign of the times, the SPDR Gold Trust actually surpassed the SPDR S&P 500 ETF (NYSE:SPY) to become the world’s largest ETF yesterday (per USAToday). GLD’s now holding some $78 billion in gold in a London vault, while SPY’s holding $77 billion in paper assets.

Gold bugs have to be getting jittery, even as they watch the value of their favorite commodity scream higher. Why? Gold just might be going parabolic, and anything that goes parabolic is doomed for a collapse (no matter how short-lived).

The same thing happened six months ago in the silver market when silver prices rocketed up more than 30 percent from roughly the end of April to the end of May. A series of new silver margin requirements from the CME was widely blamed as causing silver prices to crash.

Now, investors are starting to look at their watches and guess when the same thing’s going to happen to gold. I’m not ready to be a bear yet, though, and here are three reasons why:

1) Seduced by silver prices. I was thinking gold prices were getting over-heated until I look at the chart for the iShares Silver Trust ETF (NYSE:SLV). In April, the run-up in silver prices made gold’s current spike look paltry. In the span of 30 days, silver shot up 30 percent.

By contrast, gold has risen a mere 18 percent over the past month. If bullion is indeed going parabolic, we could be right in the middle of the most powerful part of the upward thrust. We’ve got to be careful, though. Silver more than made up for its rise by giving up all its gains in five short days. That’s a plunge of 6 percent per day!

2) Margin calls anyone? The CME took the brunt of the blame for cooling the silver market after issuing a series of vicious margin hikes when the market got overheated. During a nine-day span at the end of April, CME raised silver margins by 84 percent (per the Wall Street Journal). Two weeks ago, they started in on the margin requirements for gold raising them 22 percent on Aug. 11. CME also hinted more hikes could be imminent for gold, but still, we’re a long way from the 84 percent hike we saw for gold’s white cousin.

3) Timing is everything. Gold prices will likely remain strong through the end of the week as investors await an announcement from Federal Reserve Chairman Ben Bernanke. He’s hashing over ideas with some of the world’s most powerful bankers at the annual symposium in Jackson Hole, Wyoming, right now, and he’ll make some sort of announcement on Friday morning.

Last year’s gathering brought us QEII, of course, and some are betting there’s going to be even more quantitative easing on the horizon as the banking elite look for ways to keep the ship afloat. If that happens, expect lots of fireworks in the financial markets. I’m just not sure if it’s going to be good for gold, but I know better than to argue with a trend until its broken. Friday might be the breaking point, but I’m at least bullish until then. And if gold prices do indeed fall, I’ll look for ways to add more to my portfolio in the rocky months to come.

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Tags: CME Group, GLD, gold price forecast, gold price predictions, silver price forecast, silver price predictions, SLV, SPY
Posted in ETFs, gold, gold stocks, precious metals, private companies, ProShares, silver coins, silver stocks | No Comments »

May

2011

3 reasons to move from silver into gold

by Fred Mason

The manic rise and fall in silver prices over the past few months has a lot of precious metals investors re-assessing their holdings. In the near-term, it looks like gold bugs have the upper hand. Here are three reasons why the yellow metal will likely out-perform silver in the months to come:

1) Slow and steady wins the race. The fundamental case for gold and silver hasn’t changed, but investor perception has. Whatever the cause of silver’s violent 30 percent plunge, the aftershocks of that move will likely continue for several months. Meanwhile, gold’s proven that its support won’t be knocked out so easily. Over the past month, the iShares Silver Trust ETF (NYSE:SLV) has shed nearly 18 percent of its value. The SPDR Gold Trust ETF (NYSE:GLD) has actually appreciated 0.4 percent during the same time span. That shows unflappable support for the yellow metal even as panic seemed to set in for commodities across the board. When the muck truly hits the fan, there’s nowhere safer than gold.

2) A ratio gone mad. There’s been a lot of speculation about the gold:silver ratio of late. Silver bulls like Eric Sprott of Sprott Asset Management – which manages the Sprott Physical Silver Trust ETV (NYSE:PSLV) and the Sprott Physical Gold Trust (NYSE:PHYS) – have been calling for titanic shifts in the ratio. Sprott’s actually argued that the gold:silver ratio could fall as low as 10:1 (meaning gold would cost just 10 times as much as silver). If that were the case today and gold stayed at $1,491 an ounce, we’d be looking at silver prices around $150 an ounce. Perhaps such a move will be possible over the course of several years, but don’t expect it over the next few months. Since the 1980s, the gold:silver ratio’s been closer to 60:1, which means $25 silver is just as likely as $150 silver (in fact, it’s probably MORE likely). In the words of Dave Kansas at the Wall Street Journal: “It’s more likely that the ratio will revert to modern-era norms rather than race back to the Napoleonic era.”

3) Silver ETFs push down prices. One of the most powerful drivers of silver prices today comes from physical silver ETFs. These stock market vehicles use the cash they get from issuing new shares to buy physical silver. Conversely, when the price of silver falls, ETFs like the SLV must liquidate their physical silver holdings to buy back shares. When the market’s trending up, the SLV can accelerate the rise in silver prices. During extreme silver sell-offs, SLVs decline floods the silver market with excess supply.

“On May 4th as silver plunged below $40, SLV experienced such heavy differential selling pressure that it was forced to liquidate 4.8% of its holdings in a single trading day!” writes Adam Hamilton and Scott Wright of the Australian investing site, TheBull. “This was 16.8 (million) ounces of physical silver that hit the markets!” That’s an enormous amount of silver. Hamilton and Wright point out that it’s 60 percent of Silver Wheaton Corp.’s (NYSE:SLW) silver output for an entire year, and it hit the market in 6.5 hours!

Gold’s stability in the face of panic selling in the silver market is evidence that gold holders have the stronger hand. More selling in the silver space, though, could be on the slate as the gold:silver ratio moves back toward reasonable levels. The ratio hasn’t fallen as low as it did last month in 30 years, after all. Interpret that how you may, but I see it as evidence of an anomaly that’s in the process of correcting.

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Tags: Eric Sprott, GLD, gold price, gold price forecast, Gold Price Target, gold-silver ratio, PHYS, PSLV, silver price, silver price forecast, Silver Price Target, SLV, Sprott Inc.
Posted in commodities, gold, gold stocks, mining stocks, precious metals, silver coins, silver stocks | No Comments »

May

2011

5 reasons to ditch your silver investments today

by Fred Mason

Silver price volatility and the intense media coverage of the white metal is making it difficult to decide which side of the fence to stand on. Now more than ever, it’s important that investors remove emotions from the equation and take a fresh, rational look at their silver holdings.

Long-term, I’m still a silver bull, but the case against the metal in the near-term seems to be growing every day. Let me play devil’s advocate and give you five reasons to ditch your silver investments:

1) Over-reacting to inflation. There’s certainly an industrial component to the silver story, but inflation has been the primary driver for the metal since it bottomed in 2008. Still, as Pradeep Kandasamy at SeekingAlpha, points out, silver has over-reacted to the threat of inflation. The monetary base has increased by 100 percent since the launch of QE1 nearly three years ago.

Gold’s price rise perfectly mirrors the expansion of the money supply (up roughly 100 percent over the same time period). Silver, though, has rocketed up 300 percent, Kandasamy writes. That’s even after the recent crash! Late last month, silver was up 400 percent from it’s October 2008 lows. If silver is responding to inflation, it’s clear that response was too fast and too furious.

2) Uncharted waters. We constantly find ourselves referring back to the 1980 highs in the silver market as an indication that the metal has plenty of room to run. After all, if we adjust silver’s 1980 high for inflation, the metal actually hit prices above $130 an ounce.

We have to weigh those numbers against what the Hunt Brothers were doing, though. The two sons of a wealthy Texas oil baron almost single-handedly cornered the market in the white metal. At one point, they held nearly $4.5 billion of silver in bullion and futures contracts! (See my post Silver Thursday, the Hunt Brothers, and the collapse of a precious metal for more on silver’s last record run). If we take the Hunt Brothers out of the equation, it’s hard to argue that silver prices would have gone as high as they did.

3) New margin requirements. It’s not just the COMEX that’s making it harder on silver speculators. Now, we’ve learned that the Hong Kong Mercantile Exchange (HKMEx) has also raised margin requirements on silver futures contracts (per TheStreet). Periods of extreme price volatility in the silver market don’t just ratchet up the price of the metal, they also ratchets up the risk involved. That forces the COMEX and HKMEx to protect themselves by driving up margin requirements (see my post Why does the COMEX raise silver margin requirements? for more). Likewise, hedge fund managers and financial institutions likely ease off their positions and/or hedge their precious metals holdings during periods of extreme volatility as risk ratchets up.

4) ETFs losing steam. One of the more pervasive arguments against silver in the short-term is the relative under-performance of the silver ETFs, which could indicate that retail stock investors are losing interest in the metal. Yesterday, for example, the New York spot price for silver rose from $33.25 to more than $34.50 – a gain of 3.8 percent. Nonetheless, the iShares Silver Trust ETF (NYSE:SLV) shed nearly 1 percent of its value (including the after-hours bounce). If the trend away from SLV continues, silver spot prices will fall as the silver tail starts wagging the dog.

5) Opportunity cost. Even though I’m optimistic about silver prices six months from now, that’s a long time to leave your investments languishing. If you do foresee a lengthy period of consolidation in precious metals, it makes sense to park your cash somewhere else for the next few months. Every long position you hold, after all, means you can’t be invested somewhere else. That’s the definition of “opportunity cost.” While silver languishes, opportunities in other sectors will emerge. Park your money there until silver resumes its upward climb.

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Tags: Comex, HKMEx, Hunt Brothers, inflation, silver price, silver price forecast, Silver Thursday, SLV
Posted in commodities, gold, mining stocks, precious metals, silver coins, silver stocks | No Comments »

May

2011

Investors tentatively move back into silver after price collapse

by Fred Mason

Silver bulls started poking their heads out of the woods yesterday after one of the worst weekly declines for the metal in decades. At one point, silver was down 30 percent in four days of trading. Yesterday, though, the selling pressing seemed to lift, and the white metal tacked on a modest gain.

Total damage for the week? Silver plunged 28 percent. That’s got some investors wondering if the tide has turned against the metal for good – particularly since some of those same investors define the start of a bear market as a 20 percent decline in prices.

After four days of panic selling, Friday finally saw inflows for silver ETFs. The iShares Silver Trust ETF (NYSE:SLV) rose 2.25 percent on more than twice the stock’s typical trading volume, and the Sprott Physical Silver Trust ETF (NYSE:PSLV) surged 5.6 percent.

Silver ETFs use their share price to determine how much physical silver bullion to add or sell from their holdings. Since they’re so easy to move in and out of, the products have taken a lot of heat this week for helping to intensify the plunge in metals prices – particularly since retail investors can leverage their positions in the ETFs by using margin.

“Margin calls are eating the little guys alive, forcing them to give up their dreams of a silver-coated world,” ETF analyst Carlos Alexandre at CXA Markets told the Globe and Mail.

Of course, it wasn’t just the “little guys” getting creamed by silver’s decline. The CME Group, which owns the Comex, ramped up margin requirements for silver futures traders, too. And they didn’t do it slowly. Initial margin requirements shot up twice this week and another hike to $21,600 is due on May 9. That’s more than 80 percent higher than margin requirements were just two weeks ago.

The CME, of course, insists that their margin hikes didn’t worsen or lead to the decline in silver prices. “We try to make changes in a way that we can telegraph to the market, so that participants have notice. We try to be routine and predictable and provide no surprises,” Kim Tyler, president of CME Clearing, told the Wall Street Journal.

We can’t draw a direct cause and effect conclusion, but it’s interesting to note that the CME’s margin hike went into effect after trading on Friday, April 29. When the silver spot market opened Monday, prices immediately collapsed 12 percent and kept falling through Thursday.

Turning Point?

ETFs showed signs of stabilization on Friday, and silver mining stocks did, too. The silver streaming company, Silver Wheaton Corp. (NYSE:SLW), rose 1.91 percent, and Silver Standard Resources Inc. (NASDAQ:SSRI) climbed 2.76 percent. Some sanity, it seems, is returning to the precious metals market. Now, the question becomes, will prices bottom out here or continue falling in the weeks and months to come?

Most analysts seem to agree that the long-term trend for silver prices is up. Some are even calling on investors to buy even more aggressively in the face of the sell-off. “This argument will be hard to resist, but should be,” GMO forecaster Jeremy Grantham wrote in a recent letter to his clients (per Mineweb). “A second commodity collapse [after the 2008 plunge] may be psychologically hard to invest in…[But] in the next decade, the prices of all raw materials will be priced as just what they are, irreplaceable.”

Whether or not this is the turning point doesn’t matter in the bigger picture. Unless the global economic picture changes dramatically, silver prices will likely test their all-time record highs again before the end of the year. In an era of global currency debasement, commodities offer one of just a few safe places to hide. As I pointed out yesterday, silver prices are still up 18 percent on the year, and I expect them to be much higher come 2012.

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Tags: PSLV, silver price, silver price forecast, SLV, SLW, SSRI
Posted in ETFs, mining stocks, precious metals, silver stocks | No Comments »

May

2011

Time to short silver?

by Fred Mason

If there’s one rule I’ve learned in investing, it’s that ignoring the old saying “the trend is your friend” can lose you a whole lot of money. Stocks, bonds, currencies and commodities are all cyclical. And while I believe that the long-term trend in silver is up (reference my post yesterday: 3 reasons the rally in gold and silver prices is far from over), it’s clear that support for the white metal is breaking down in the short-term.

In part, we have the CME Group to thank for that. The Comex’s owner announced that it was raising margin requirements for the metal for the third time time in a week. As of the close of business on Monday, new initial margin requirements for silver have climbed from $14,513 to $16,200 per contract, according to BusinessWeek. Margins have risen more than 280 percent from $4,250 over the past 12 months.

The CME Group adjusts margin rates when it fears volatility in the markets could expose the company itself to losses. If metal falls too fast, for example, some traders may be unable to cover their losses – and that’s tantamount to a default that cuts into CME’s profits.

“Silver is often the lead indicator for changes in trends, or at least for corrections,” an analyst at Societe Generale SA wrote in a note to clients (per BusinessWeek). Right now, the lead indicator is pointing down.

And physical silver ETFs probably aren’t helping the situation. Stocks like iShares Silver Trust (NYSE:SLV) and the Sprott Physical Silver Trust (NYSE:PSLV) trade on exchanges just like shares in companies. They take the equity they get from investors, though, and use it to purchase physical bullion. When investors move out of the ETFs, SLV and PSLV sell bullion from their physical stockpiles.

Since ETFs are so easy to move in and out of, many investors fear they’re injected even more volatility into the already-volatile silver market. That steepens both climbs and sell-offs in the metal.

The most damming signal yet that the end may be near for silver, though, comes from a number of noted hedge funds and hedge fund managers that have started moving out of the metal. Among them? George Soros, Passport Capital’s John Burbank, Alan Fournier of Pennant Capital and Eric Sprott of Sprott Asset Management (the company that happens to manage the Sprott Physical Silver Trust).

Inflation may be imminent, but your best bet on making money might be shorting one of the world’s most popular inflationary hedges. We can logically justify why an asset should move in a particular direction, but all we know in the end is the trend. And you shouldn’t have much trouble identifying the trend if you look at silver’s recent charts.

Not sure how shorting works? Check out my post: How to short silver.

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Tags: Comex, Eric Sprott, George Soros, PSLV, shorting stocks, silver price, silver price forecast, SLV
Posted in gold, mining stocks, precious metals, silver coins, silver stocks | No Comments »

Apr

2011

How to short silver

by Fred Mason

There’s a party right now in precious metals. Over the past 12 months, silver prices have clocked gains of more than 150 percent. When the music stops, silver prices, which are traditionally more volatile than gold, could take a drubbing. Here are some ways to make money shorting silver should investor sentiment sour on the “devil’s metal”:

1) Inverse ETNs. The simplest way to bet against silver prices is by investing in a short silver ETF. ProShares UltraShort Silver ETF (NYSE:ZSL) uses financial instruments in an attempt to return 2X the inverse of silver spot prices. If silver prices fall 1 percent, ZSL should rise 2 percent. Conversely, if silver prices rise 1 percent, ZSL should drop 2 percent. Shares in the UltraShort Silver ETF trade on the NYSE just like shares in an actual company.

2) Short the long ETFs. Don’t like being limited to a single inverse ETF? You could also profit from a silver sell-off by shorting shares in a long silver ETF. iShares Silver Trust ETF (NYSE:SLV) is hands down the most popular long silver ETF with nearly 30 million shares trading hands every day. Other popular silver ETFs include the SPDR S&P Metals and Mining (ETF) (NYSE:XME), which invests in silver mining shares, and the leveraged ProShares Ultra Silver (ETF) (NYSE:AGQ), which attempts to return 2X the spot price of silver.

3) Go long the dollar. It will take some remarkable tightening by the Fed to convince investors that the dollar’s future looks promising. If they adopt an aggressive plan to raise interest rates, silver prices will likely lose much of their support. At the same time, the dollar should strengthen against foreign currencies. In such an environment, a bullish bet on the dollar itself makes sense. Buying shares in the PowerShares U.S. Dollar Index Bullish Fund (NYSE:UUP) is equivalent to going long the USD and short the Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

4) Put options. Buying put options gives you the right to sell a stock at a specific price in the future. If you think the SLV is going to plummet by the end of May, you could buy put options that give you the right to sell shares in the ETF at a specific price – let’s say at $45. If the price of SLV falls below $45, you could go to the open market, buy the shares on the cheap, and re-sell them at the put option price. Incidentally, put options on the SLV spiked last week (per the Wall Street Journal) – an indication that investors are growing concerned about a silver sell-off.

5) Short the miners. Shorting the shares of specific silver mining companies could pay off. As the price of silver falls, so too will the profits miners reap. Silver explorers (companies that are yet to break ground on a mine) could be particularly vulnerable to a downdraft in silver prices. I’d caution, though, that you avoid shorting any company that could be subject to a buyout bid. Randy Smallwood, the CEO of Silver Wheaton Corp. (NYSE:SLW), went on the record recently predicting a wave of acquisitions when silver prices stabilize. If you’re caught shorting a company that’s bought out, your brokerage account could get cleaned out overnight.

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Tags: AGQ, options, shorting stocks, silver price, SLV, SLW, UUP, XME, ZSL
Posted in commodities, ETFs, mining stocks, precious metals, silver coins, silver stocks | No Comments »

Mar

2011

Top 10 best gold and silver ETF funds

by Fred Mason

Here’s a look at the Top 10 best gold and silver ETFs that trade on major U.S. exchanges. We’ve ranked them by volume, as some of the niche ETFs in the precious metals market are so thinly traded they can be subject to extreme price volatility or – in some cases – underperformance when compared with the underlying commodities they’re supposed to track.

iShares Silver Trust (ETF) (NYSE:SLV), Volume 38 million shares The world’s largest silver ETF, the iShares Silver Trust currently holds 10,764 metric tons of silver. That’s a lot of ingots. The SLV is the second-strongest performer on our list of the Top 10 gold and silver ETFs, getting shown up only by the Ultra Silver ETF (a double-long silver ETF). With an average volume around 38 million, SLV is easily the most active gold and silver ETF on the market. 12-month performance: +107 percent

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SPDR Gold Trust (ETF) (NYSE:GLD), Volume 17.4 million shares Among the most well-known ETFs on the exchanges, it’s more common to hear the SPDR Gold Trust referred to by its ticker: GLD (that’s when you know you’ve made it). The GLD currently has a market cap of more than $56 billion. 12-month performance: +26 percent

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Market Vectors Gold Miners ETF (NYSE:GDX), Volume 5.8 million shares The GDX seeks to mirror the NYSE Arca Gold Miners Index – an index that’s weighted toward large-cap gold mining stocks. The index’s single largest component stock is Barrick Gold Corporation (USA) (NYSE:ABX), which makes up nearly 17 percent of the index’s weighting. 12-month performance: +29 percent

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iShares Gold Trust (ETF) (NYSE:IAU), Volume 5.2 million shares A physical gold ETF, the iShares Gold Trust has largely played second fiddle to GLD. IAU has a market cap of $5.4 billion while GLD’s market cap exceeds $56 billion. 12-month performance: +26 percent

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SPDR S&P Metals and Mining (ETF) (NYSE:XME), Volume 2.8 million shares The SPDR S&P Metals & Mining ETF mirrors the S&P Metals & Mining Select Industry Index by buying baskets of shares in metals and mining stocks. The index is comprised not just of precious metals but steel, coal and consumable fuels, aluminum and other metal and mining-related stocks. Most recently, the ETFs largest holding was Australian iron ore and coal producer Cliffs Natural Resources Inc. (NYSE:CLF), which made up 4.71 percent of the fund’s holdings. 12-month performance: +26 percent

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Market Vectors Junior Gold Miners ETF (NYSE:GDXJ), Volume 1.8 million shares The Market Vectors Junior Gold Miners ETF mirrors the Market Vectors Junior Gold Miners Index. Since the Junior Gold Miners Index is comprised of small- and medium-cap gold mining stocks, the GDXJ is subject to more volatility than the GDX, which is geared toward larger mining companies. When the industry’s doing well, GDXJ does even better. 12-month performance: +53 percent

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ProShares Ultra Silver (ETF) (NYSE:AGQ), Volume 1.59 million shares The AGQ ETF invests in silver futures and forwards as it seeks to return 2X the daily returns of silver as measured by the U.S. Dollar fixing price for delivery in London. It’s a very bullish bet that silver’s going to rise in the coming days. Just don’t be caught holding it if sentiment shifts away from the metal. 12-month performance: +266 percent

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PowerShares DB Gold Double Long ETN (NYSE:DGP), Volume 476,000 shares DGP invests in gold futures contracts as it attempts to return 2X the daily price of gold bullion as measured by movements in the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold. 12-month performance: +53 percent

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ProShares Ultra Gold (ETF) (NYSE:UGL), Volume 223,000 shares UGL seeks twice (200%) the daily performance of gold bullion by investing in gold futures and forwards. The fund has shot up 12 percent over the past month. 12-month performance: +51 percent

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ETFS Gold Trust (NYSE:SGOL), Volume 151,000 shares SGOL is designed to reflect the performance of the price of gold bullion backed by physical gold that’s held in Zurich, Switzerland. The fund’s physical gold conforms to the London Bullion Market Association’s (LBMA) rules for Good Delivery. 12-month performance: +26 percent

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Honorable Mention: Direxion Daily Gold Miners Bull 2X Shares (NYSE:NUGT), Volume 28,500 shares The newest of the offerings on our list, NUGT seeks to return 200 percent of the price performance of the NYSE Arca GoldMiners Index. Interestingly, the fund counts GDX (another gold mining ETF listed above) as its largest holding. 3-month performance: -4 percent

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Tags: AGQ, DGP, ETNs, GDX, GDXJ, GLD, gold bullion, IAU, NUGT, SGOL, silver bullion, SLV, UGL, XME
Posted in commodities, ETFs, gold, gold stocks, mining stocks, precious metals, silver stocks | 1 Comment »

Mar

2011

How to decide when to sell silver bullion and stocks

by Fred Mason

Silver’s meteoric rise has a lot of buyers on the sidelines wondering if they’ve missed the boat. Just how high can the precious metals market climb? Silver was up more than 17 percent in the month of February alone. Driven by a falling dollar, political turmoil in the oil rich Middle East and ongoing money-printing by the Federal Reserve, silver’s started off strongly in March, too.

Identifying a top in any market is difficult, but it’s important to look at metals from a historical context when trying to decide when to sell your silver bullion or stocks. The last major bull market in precious metals ran nine years from November of 1971 to January 1980.

“Many people don’t realize this, but silver rose 3,646 percent (during the 1970s),” Jeff Clark, the editor of Big Gold, tells The Daily Crux. “If you were to apply the same percentage rise to our current bull market, silver would climb another 500% from here, and the price would hit $160 an ounce. Those are just numbers, but it shows that we have an established precedent for the price to go much higher.”

Clark argues that fundamentals will ultimately determine the silver price – unless, of course, we enter a precious metals mania. That’s when identifying a top in the market gets particularly difficult. Even in a mania, prices don’t rise in a straight line; they tend to get even more volatile.

Still, there are a few cues you can look for to help spot a mania-driven top in prices. “I don’t think it stops until SLV, the silver ETF, is a favorite of the fund managers… until Silver Wheaton is a market darling of the masses… until Pan American Silver is Wall Street’s top pick for the year,” Clark says. “That’s when I’ll be looking for the end of this silver bull market.”

We’re not there yet. More importantly, the fundamentals for silver haven’t changed. Food inflation’s rampant abroad, the Fed’s still printing money, European banks haven’t found their footing, unemployment’s stagnant and the housing market could fall further before it stabilizes. So long as a clouds hang over the economy, silver will likely retain its shine.

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