Silver has been performing quite poorly over the past few
weeks due to the broad commodity weakness and a shift to more
risky asset class like equities (read:
Time to Sell This Commodity ETF?
). This is especially true with the backdrop of the strengthening
dollar and continued bullishness in the equity space that are
tempering the demand for lower risk assets across the board.
In fact, the white metal has plunged 30% in the year-to-date
time frame and more than 50% since its peak at the end of April
2011, making it one of the worst performing metals this year.
Currently, the metal is trading below $23 per ounce with some
forecasting a bigger drop in the days ahead as well.
Silver is moving on the same track as gold, due to falling
investment demand and weak industrial applications, a primary
driver in determining silver price. This is particularly the case
given some of the fundamental factors surrounding the global
4 Ways to Short Gold with ETFs
Weak Global Markets
The U.S. economy is improving but China, which is considered
to be the biggest industrial fabricator after the U.S, is seeing
sluggish economic growth. Europe is still in recession (or
near-recession territory) and we are seeing an increasing
appetite for equities over commodities.
Further, the growing speculation over the end of the Fed's
quantitative easing program amid an improving U.S. economic
outlook adds to the appeal of the dollar, and lowers the demand
for silver and silver ETF holdings (read:
Commodity Slide Hits Silver ETFs
As a result, investors who are bearish on silver right now may
want to consider a near-term short on the precious metal.
offer several options to investors to accomplish this task.
Below, we highlight a few of our favorites and some of the key
differences between each in the short silver ETF market:
ProShares UltraShort Silver ETF (
This fund seeks to deliver twice (2x or 200%) the inverse (or
opposite) return of the daily performance of silver bullion in
U.S. dollars; the silver price is fixed for delivery in London.
Launched in December 2008, ZSL makes a profit when the silver
market declines and is suitable for hedging purposes against the
fall of silver prices.
The product is expensive when compared to other geared options
in the space though, charging 95 bps in fees a year. However, it
is rich in AUM with $149.3 million and average daily volumes of
roughly 500,000 shares. The inverse silver ETF has gained about
66% in the year-to-date time frame, suggesting it has been a
solid investment in the current environment.
VelocityShares 3x Inverse Silver ETN (
This product provides three times (3x or 300%) short exposure
to the daily performance of the S&P GSCI Silver Index Excess
Return plus returns from U.S. T-bills net of fees and expenses
Combine Silver ETFs and Covered Calls with
The ETN was launched in October 2011 and since then has been
able to amass an asset base of $30 million. The product is the
high cost choice in the silver bullion space, charging 165 bps in
fees per year from investors. However, it has a relatively tight
bid/ask spread given its good average volume of more than 223,000
shares per day.
Unsurprisingly given silver's slump, the note has returned
more than 110% so far in the year buoyed by negative sentiments
for silver across the globe.
Investors should note that since these products are extremely
volatile, these are suitable only for traders. Additionally, the
daily rebalancing-when combined with leverage-may make these
products deviate significantly from the expected long-term
performance figures (see more in the
Three Biggest Mistakes of ETF Investing
Still, for ETF investors who are bearish on silver in the near
term, any of the above products could make for an interesting
choice. Clearly, many are abandoning the precious metal, so a
near-term short could be intriguing for those with a high risk
tolerance, and a belief that the trend is your friend in this
corner of the investing world.
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PWRSH-DB SILVER (DBS): ETF Research Reports
VEL-3X INV SLVR (DSLV): ETF Research Reports
ETF-SILVER TRST (SIVR): ETF Research Reports
ISHARS-SLVR TR (SLV): ETF Research Reports
PRO-ULS SILVER (ZSL): ETF Research Reports
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