In this article, we discuss the 10 best silver ETFs. If you want to skip our discussion on the silver industry, you can go directly to the 5 Best Silver ETFs.
According to Research and Markets, the demand for silver globally is expected to compound at an average annual rate of nearly 3% to reach approximately 1.20 billion ounces by 2026. The demand for silver is expected to remain strong as a safe-haven asset and an industrial metal. Silver has a variety of uses in various sectors, including electronics, medicine, solar panels, and water purification. Approximately 50% of the silver demand is attributed to industrial use. The rise in demand is driven by the aggressive growth of the green economy, as silver plays a crucial part in the manufacturing of electric vehicles (EV) and photovoltaics (PV). According to News Direct, a normal EV uses 25 grams (0.88 ounces) to 50 grams (1.76 ounces) of silver. The automobile sector has an annual silver consumption of 55 million ounces, which is expected to reach 90 million ounces by 2025. Meanwhile, according to the Silver Institute, the use of silver in PV was recorded at 140.3 million ounces in 2022. The demand for silver for PV has nearly increased by three times from 50.5 million ounces in 2013. An average solar panel has 20 grams (0.64 ounces) of silver.
China is a strong end market for solar energy as the country intends to install 154 gigawatts (GWs) of solar capacity in 2023 as opposed to an initial guidance of 129 GW. The installations have the potential to soar even higher, possibly reaching anywhere from 200 GW to 300 GW in the coming year. China has already achieved a threefold year-over-year (YoY) increase in solar panel installations from January 2023 to April 2023. Overall, the precious metal has an industrial demand of 539 million ounces. The Silver Institute highlights that the physical ownership of silver in the form of silver bars and coins was 329 million ounces in 2022. The use of silver as jewelry and silverware is also significant, with an annual demand of 308 million ounces in 2022. Mexico, Peru, and China are amongst the leading silver-producing nations in the world.
Silver Supply Outlook
Looking ahead, the growth in the supply of silver is expected to observe a slowdown in the coming years as ore grades diminish at major mines around the world. The supply of silver is expected to grow at a CAGR of only 1.2% to reach 1.06 billion ounces by 2026. This suggests an impending excess demand for silver, which could potentially drive up its price in the future. This expected increase in silver prices is supported by the fact that the price of silver futures has already observed an increase of 66.4% in the last five years. This is 3.2 percentage points (ppts) and 11 ppts higher than the return generated by gold futures and the S&P 500 Index, respectively, during the same period. Silver outperforming gold and the equity market in the last five years could come as a surprise to numerous investors as silver does not receive the same recognition in the financial media as gold. The limited coverage of silver by the mainstream media is also reflected in its popularity amongst investors. This is evident by the fact that iShares Silver ETF, which is considered the biggest silver ETF in the world, has net assets of nearly $10.76 billion. Meanwhile, the biggest gold ETF has net assets that are 5.15 times higher at $55.6 billion. The iShares Silver ETF price stood at $21.01 as of September 12.
In the context of the silver market, it's worth noting that there are multiple notable silver mining companies globally. Popular players in the silver mining industry, such as Pan American Silver Corp. (NASDAQ:PAAS), Newmont Corporation (NYSE:NEM), and Wheaton Precious Metals Corp. (NYSE:WPM) are known as some of the best silver mining stocks. Here’s what White Falcon Capital Management said about Wheaton Precious Metals Corp. (NYSE:WPM) in its Q2 2023 investor letter:
“Precious Metals Royalty basket (Wheaton Precious Metals Corp. (NYSE:WPM), SSL, TFPM): In the current macroeconomic environment, there are many ways to ‘win’ with gold. It is remarkable that even with record positive real yields, gold is flirting with all time highs. Why? Western central banks are increasing interest rates which means that they will have to pay more interest on the record levels of debt that their government’s owe. Where will the money come from to pay the higher interest expense? The answer is simple – more debt and more money printing! We believe the gold knows this! We believe that precious metals will protect real purchasing power and act as a hedge to the portfolio when macroeconomic uncertainty arises. Owning royalty companies at reasonable valuations gives us a high quality exposure to precious metals without project or cost inflation risks inherent in a mining company.”
With this context in mind, let's take a look at the 10 best silver ETFs.
We have shortlisted the 10 best silver ETFs for 2023 based on their historical five-year performance as of September 12. Each of the ETFs listed below offers varying degrees of exposure to silver, either directly or indirectly. Some of these choices invest directly in silver contracts, while others invest in companies actively engaged in silver mining and are amongst the best silver miners' ETFs.
10 Best Silver ETFs
10. ProShares Ultra Silver (NYSEARCA:AGQ)
5-Year Performance as of September 12, 2023: 18.5%
Total Net Assets as of September 12, 2023: $404.19 million
Expense Ratio: 0.95%
ProShares Ultra Silver (NYSEARCA:AGQ) seeks to provide twice the daily return of silver bullion as measured by the London Silver Fix spot price by using leverage and derivatives. It comes with risks, including amplified daily losses if silver prices decline. The ETF was established in December 2008 and is managed by ProShare Advisors LLC. The ETF has an average daily trading volume of around 671,000 shares. According to data compiled by Insider Monkey, Murray Stahl’s Horizon Asset Management is the biggest hedge fund holder in the ETF as of Q2 2023, with a stake of over $59.8 million.
9. Invesco DB Silver Fund (NYSEARCA:DBS)
5-Year Performance as of September 12, 2023: 34.4%
Total Net Assets as of September 12, 2023: $36.8 million
Expense Ratio: 0.75%
Invesco DB Silver Fund (NYSEARCA:DBS) is designed to track changes in the price of silver. The ETF holds silver futures contracts traded on the COMEX exchange. The futures contracts are collateralized by silver held in vaults. The ETF was launched in January 2007 and is managed by Atlanta, Georgia-based investment management firm Invesco. It must be noted that the ETF pays no dividends since it invests in commodities futures rather than stocks. The ETF rolls over its silver futures contracts monthly to maintain exposure.
8. Invesco DB Precious Metals Fund (NYSEARCA:DBP)
5-Year Performance as of September 12, 2023: 43.7%
Total Net Assets as of September 12, 2023: $150.98 million
Expense Ratio: 0.75%
Invesco DB Precious Metals Fund (NYSEARCA:DBP) tracks an index composed of futures contracts for gold and silver. Nearly 19% of the fund provides exposure to changes in the price of silver futures. Meanwhile, 79% of the portfolio is invested in gold futures. The silver and gold futures contracts held by the ETF are traded on the COMEX exchange and collateralized by silver and gold bullion. The allocation between gold and silver futures contracts can change each month depending on the index methodology. The Manufacturers Life Insurance Company (Manulife) is the biggest institutional holder of the ETF, with a stake of around $23.3 million.
7. Invesco DB Commodity Index Tracking Fund (NYSEARCA:DBC)
5-Year Performance as of September 12, 2023: 45.7%
Total Net Assets as of September 12, 2023: $2.09 billion
Expense Ratio: 0.85%
Invesco DB Commodity Index Tracking Fund (NYSEARCA:DBC) has been formulated to track the DBIQ Optimum Yield Diversified Commodity Index Excess Return. The index comprises futures contracts related to 14 heavily traded commodities across various categories, including energy, precious metals, industrial metals, agriculture, and livestock.
Within the ETF, silver is one of the most actively traded futures, with a weightage of 2.23%. The weightage assigned to silver can fluctuate on a monthly basis in accordance with the rules defined by the underlying index. In recent years, the level of exposure to silver within this ETF has varied between 3% to 6%.
5-Year Performance as of September 12, 2023: 50.3%
Total Net Assets as of September 12, 2023: $978.3 million
Expense Ratio: 0.60%
abrdn Physical Precious Metals Basket Shares ETF (NYSEARCA:GLTR) holds physical bullion of gold, silver, platinum, and palladium stored in vaults. The ETF provides exposure to silver in the purest form through physical ownership. The ETF came into being in October 2010 and has a 26.5% exposure to silver through its holdings. Gold takes the lead as the largest asset, accounting for 61.6% of the total holdings. The ETF owns 11.6 million ounces of silver through 11,958 bars. The silver bullion bars held by the ETF meet the London Bullion Market Association's delivery standards.
In addition to ETFs, investors are also looking at some of the best silver stocks such as Pan American Silver Corp. (NASDAQ:PAAS), Newmont Corporation (NYSE:NEM), and Wheaton Precious Metals Corp. (NYSE:WPM) to gain exposure to the silver industry.
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