Silver ETF: Investing In a Metal With Actual Uses
The silver ETF is riding on the heels of the release of the gold ETF. Barclays made the necessary filings on the silver ETF 9 months ago. Other exchange traded funds have, on average, launched 12 months following registration. That makes for an expected availability date of late June or early July for the silver ETF.
Peter Spina of GoldSeek.com, writes that the ETF will initially be backed up by 130 million ounces of silver. That also happens to be the amount in current inventories on the Commodities Exchange division of the New York Mercantile Exchange stand. So with the silver ETF sucking up so much silver, where will the rest of the supply come from? That question has some people thinking that the price of silver could be in the teens by the summer due to supply issues.
Unlike the gold ETF which I'm not strongly interested in as a separate investment class, I'm not as sure about silver. Silver is used in a wide variety of applications in several industries, including consumer electronics (e.g. cell phones), jewelry, military technology, health care, and photography. This makes it a valuable commodity for more than just because it looks nice. I may end up owning some silver as part of a future commodities ETF which also happens to be how I get a little exposure to gold.
Note that gains from the silver ETF will be taxed at the collectibles rate of 28% vs. the long-term capital gains rate of 15% (or less). If you're going to invest in this ETF, consider using a tax deferred account.
update April 28, 2006
The silver ETF is expected to start trading today. It has received regulatory approval and earlier this week we learned that Barclay's had deposited a fairly large amount of silver to back the shares of the ETF.