Silver ETFs fall 12% in one month. Are these ETFs worth your money?

Silver ETFs are down 12% in the last one month. These ETFs are new entrants to the mutual fund space and they have been bleeding since the inception because of poor global economic conditions. Unlike gold funds, Silver ETFs mostly work in tandem with the equity markets. It means, the factors that impact the stock Market may also impact silver.

Mutual fund managers believe that a rally in the US dollar triggered by hawkish actions of the US Federal Reserve are negatively impacting prices of commodities including silver.

“We believe till the time geo-political uncertainty continues and the US Fed remains hawkish, commodities including silver will remain volatile. However, if inflation remains sticky, then both gold and silver could perform well due to their role as a hedge against inflation. Also, silver is just coming off a decade-long consolidation phase with increased demand from new age industries such as 5G Technology and Solar Energy,” says Chintan Haria, Head Products & Strategy,

Mutual Fund.

Silver futures on dropped 0.18% on Thursday to Rs 60,668 per kilogram. In the last three months, since the Silver ETF category was launched, they have offered -4.85% returns. Gold funds are doing much better than Silver ETFs with 0.54% returns in 3 months and falling -5.52% in the last one month.

Some mutual fund managers say that silver is not exactly a good hedge in your portfolio. The prices of silver are highly influenced by market conditions and do not move in the opposite direction like gold. Hence many funds managers believe that gold is a much better diversifier that can give you long-term diversification against equities and fixed income. .

“Because of its once precious metal status, silver to an extent can help in combating the effects of inflation on a portfolio but not as efficiently as what gold tends to do. Also, since it was delinked as a form of money, silver is largely used in industry and prices tend to move more in tandem with overall economic growth and hence risk assets, which as we know are currently in pain. In contrast, gold attracts investors looking to diversify in times of risk aversion when equities suffer, getting a price push and proving to be a better diversification tool,” says Chirag Mehta, CIO- Quantum AMC.


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