Relationship Between Physical Silver and SLV.

In Investment Returns on April 12, 2011 by CQCA

Investors looking to directly add silver to their portfolios have two options: physical silver or an ETF.  Physical silver means coins and bars, usually held in a safety deposit box or private residence.  An ETF is traded like a stock, but instead of representing ownership of a company, in represents an actual asset, such as a commodity.  The most common ETF for silver is the iShares Silver Trust (SLV).

Even though SLV is linked to physical silver, the share price of SLV and the spot price of silver do not always move in tandem.  The above chart took the average monthly closing share price of SLV and the average monthly closing spot price of silver. Data for the monthly closing spot price of silver was taken from the Silver Institute.

The reason prices for each would be different are that they both serve different functions.  If an investor seeks easy, instant investment or divestment of silver, an exchange traded fund is the better alternative.  If an investor believes the financial system will collapse and civilization will press the restart button, physical silver is ideal.  However, these differences do not account for the two similar financial products’ price occasionally moving in different directions or lagging each other.  This will not affect long-term holders of silver, but high-volume traders could learn from this.


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