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Possibly The Only Silver ETFs To Be Concerned With

December 16, 2015 8:49 am
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With year-to-date losses of just under 30 percent, the ETFS Physical Platinum Shares (NYSE: PPLT) and the ETFS Physical Palladium Shares (NYSE: PALL) are easily the worst performers among the major precious metals exchange-traded funds.

The SPDR Gold Trust (ETF) (NYSE: GLD) is down just 10.6 percent, while the iShares Silver Trust (NYSE: SLV) looks good compared to PALL and PPLT with a year-to-date loss of 12.6 percent. Shrewd commodities and ETF investors know better than to be fooled by silver.

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Flows data have proven to be accurate harbingers of silver's recent fate, and traders are getting it right with inverse, leveraged silver ETFs— something that is not always the case with leveraged gold miners ETFs.

SLV and rival Silver Trust (NYSE: SIVR) have been losing assets as investors, concerned about the effects of higher interest rates on commodities, have continued departing precious metals ETFs.

The Commodities Concern

“Since topping out in August 2011, commodity ETP assets have been in decline thanks to negative returns and sharp redemptions. Investors have yanked more than $22 billion out of commodity ETPs over this period,” according to Morningstar.

However, what long-term investors should concern themselves with is long-term, risk-adjusted returns – and that outlook is bleak for commodities because, as Morningstar's data indicate, portfolios including commodities result in lower Sharpe Ratios than traditional 60 percent equity/40 percent fixed income portfolios.

Translation: These are the days for risk-tolerant traders to consider inverse silver exchange-traded products, including the ProShares UltraShort Silver (ETF) (NYSE: ZSL) and the Credit Suisse AG – VelocityShares 3x Inverse Silver ETN (NYSE: DSLV).

Inverse Silver

“This morning we see SLV barely trading above another 2015 low registered just yesterday in the product, and 2015 in general has been brutal for the metal and related precious metals, since none of them trade in a vacuum. Even though it has performed well this year being on the bearish side of Silver prices, ZSL only has $55 million in assets under management and has seen modest outflows (-$12 million) year-to-date in spite of its timeliness,” said Street One Financial Paul Weisbruch in a note out Tuesday.

DSLV attempts to deliver triple the daily inverse returns of the S&P GSCI Silver Index Excess Return while ZSL, the ProShares product, seeks to deliver double the daily inverse returns of silver prices at the London fixing.

ZSL is up nearly 13 percent over the past three months while DSLV is higher by 16.7 percent over that period.

Image Credit: Public Domain

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