ETF Silver Investing and Lessons From Musical Chairs

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Trade Traded Funds are a popular investment vehicle for mainline investors these times. They signify a convenient way to take part in a offered course of investments, which resembles a mutual fund in a number of ways. Nevertheless, the fund trades more like a stock and does not have all of the disadvantages mutual fund traders routinely complain about.

In the world of precious metals investing, there are certainly ETFs available. While some vehicles may track a cluster of companies, this kind of as junior mining companies, for example, other people will monitor underlying commodities such as organic gasoline, uranium, or valuable metals. Two of the more popular vehicles are GLD for gold investing and SLV for silver investing. As for the latter ETF, silver traders find this attractive because it is a way to “perform” the silver bull operate with ease. Think about it this way. With just this 1 ETF, silver is now a part of your portfolio and you’ve averted all the mutual fund pitfalls.

Moreover, there is greater allure nonetheless. With the SLV ETF, silver can convey profits to you with out you even understanding the title of a single mining business that creates an ounce of silver! You might not even know what the spot price of silver is. And you might not have the foggiest idea exactly where you would even buy physical silver apart from your neighborhood jewellery store.

This all seems great. However, as they say, all that glitters is not gold. And it might not be silver either. From my perspective, when you invest in the SLV ETF, silver might not really be in your portfolio after all. For starters, you obviously do not have physical silver you have a electronic entry in your on-line brokerage account. “Big deal,” you say, “so it is with all of my holdings.” Honest sufficient. So, allow me inquire you a query. If you go the route of ETF silver investing, what exactly do you have?

Here is the problem as I see it. Frankly, the silver marketplace is very tiny. It is approximated that only about 600,000,000 ounces of silver are produced yearly. That might audio like a lot, but I want you to think about two essential points.

On the one hand, be aware that the vast vast majority of manufacturing is consumed by business, since silver is an essential part of every thing from dentistry to electronics and past. When all is stated and done, there may be 100 million ounces left for investors. That means that, if everybody in the United States needed a 1-ounce silver round this year, only 1 out of each 3 people would even get one. A full two-thirds of us couldn’t even get our fingers on one stinking coin! Are you beginning to see the image?

Now, on the other hand, let’s appear at it in hard numbers. At $20 an ounce, even a generous one hundred million ounce allotment for annual silver investment would put the silver market (for investment purposes) at 2 billion bucks. At $30 an ounce, we are at $3 billion. And even $fifty an ounce for silver would make the silver investment market just $5 billion. That’s really small.

I hope you can now value just how minuscule, in relative conditions, the investment market for bodily silver really is. Now, we can go on from there to ponder a couple of things. A for the SLV ETF, silver is supposed to be a core keeping, right? In other phrases, SLV is designed to track physical silver costs. So, as for any actual, tangible assets that may exist in the SLV ETF, silver should be higher amongst them. Nevertheless, we can know definitively that the SLV is not gobbling up all available investment silver. After all, I have some of it!

So how much of the generously approximated 100 million ounces each year is SLV adding to its reserves? How does that figure compare to the marketplace cap of the SLV? See the problem? When there is motion in this ETF, silver is supposedly the driving force. But how can SLV justifiably rise in concert with physical silver if there is not enough physical silver to back again it? How is ETF silver investing any different from the fractional reserve fraud of the fiat money method the Federal Reserve operates, which has led to the huge decline in buying energy of the “dollar?” What would occur if everybody in SLV started to demand redemption and wanted the real thing instead? Isn’t this why the Federal Reserve no longer issues Silver Certificates?

ETF silver investing reminds me of a game I used to play as a kid. What was it called? Oh, yeah: Musical chairs.