Sunday, January 22, 2006

Silver Exchange Traded Funds (ETF)

By now Silver Exchange Traded Funds will have been launched.

The idea with silver exchange traded funds, is that an investment in certificates backed by silver, essentially administered by brokers, are traded instead of the actual trading or buying and selling of real silver.

When the gold ETF was launched, it took off like a rocket and there has been considerable speculation that the silver ETF will do the same.

Around 1980 there was about 2.5 to 3 billion ounces of silver mined. Today above ground stockpiles of silver have dwindled to almost nothing and warehouse inventories are down to 100 million ounces, of which two thirds are already spoken for. Currently there are critical low reserves of silver and there is a potential for a serious silver shortage in the years to come.

Silver is absolutely essential for industry, being used in many things from keyboards to phones, refrigerators and thousands of other manufactured goods. Also silver production is mostly a by product of other mining such as lead, gold and zinc for example. There is little actual silver being mined and the silver consumption has been outstripping supply for over 14 consecutive years.

It is entirely possible that the launch of silver exchange traded funds is going to ride on the back of this deficit in silver supplies and this would help to boost the value of the ETFs.

Silver is always a good buy whether you are investing in silver coins or silver bars and it is considered that silver bullion is quite likely to rise over the coming months.

One of the issues to consider with ETF is that one may have tax issues which would not occur if one is simply purchasing silver bullion. That plus the endless brokers fees and other costs involved and the fact that whereas holding actual silver is more appealing to collectors and silver coins can always be counted upon to improve in value, movements in the value of certificates can be very volatile.

So when it comes to silver exchange traded funds, feel free to participate but tread carefully and, remember, there is nothing like actually possessing real silver bullion in the form of silver coins and silver bars.

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