What is Silver ETF? (Exchange-Traded Funds)

We have heard recently that there were many offloading of Silver ETFs. What is these Silver ETFs? Why dothey have such impact on the Silver Spot price? Let’s examine it together.

ETF = May Not Be Physical Silver
ETF = May Not Be Physical Silver

According to WikipediaSilver exchange-traded products are exchange-traded funds (ETFs), exchange-traded notes (ETNs) and closed-end funds (CEFs) that aim to track the price of silver. Silverexchange-traded products are traded on the major stock exchanges including the London and New York Stock Exchanges. The U.S Geological Survey cites the emergence of silver ETFs as a significant factor in the 2007-2011 price rise of silver. As of September 2011, the largest of these funds holds the equivalent of over one third of the world’s total annual silver production.

Essentially, ETFs are no different from FIAT currency or the stock market, they are electronic money.  Such instruments do not necessarily hold physical Silver.

Q: Advisors frequently tell us not to be invested in gold/silver exchange traded funds (ETFs) as they could collapse and leave the investor with nothing but paper. Can that happen when one is invested in ETFs which are backed 98% by gold and/or silver bullion, such as the Sprott Physical Gold and Silver funds)? ~ Virginia R.

A: As long as ETFs are holding physical gold or silver, and essentially issuing certificates of pro-rata ownership in the form of stock, then there’s nothing to worry about in terms of them collapsing. That’s because the metal is there. Exchange traded notes (ETNs), however, are another matter. The structure of ETNs is complicated, and theoretically they are a much dicier proposition. When I look at an ETN, I look primarily at the “credit” and reputation of who is backing it. – Money Morning – http://moneymorning.com/2013/04/05/everything-you-wanted-to-know-about-wall-street-and-werent-afraid-to-ask/


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