Sprott Launches Silver-Focused ETF – What's Driving Interest In The Precious Metal?

While the performance of U.S. large-cap equities captured the attention of investors in 2024, returning 25.02%, silver's performance for the year was in a similar vicinity, returning 20.58%. The top-of-mind value proposition of precious metals, such as gold and silver, is their ability to hedge against inflation, volatility and geopolitical uncertainty. However, in the case of silver, there are also new industrial developments and broader macroeconomic changes that have been driving its value, which we look at below. 

Assessing The Economic And Industrial Landscape For Silver

Current market developments, from both a macroeconomic and industrial perspective, are supportive of silver, says Sprott Asset Management SII, part of Sprott, Inc. Regarding the former, as outlined in a recent investor deck for Sprott's newly launched Sprott Silver Miners & Physical Silver ETF SLVR – which it says is the only¹ ETF focused on providing pure-play² exposure to silver miners and physical silver – the current market environment of lowered interest rates and decelerating inflation has historically been beneficial for silver, as the metal's price has historically rallied following rate cuts from the U.S. Federal Reserve. A key economic consideration that would influence silver's price is the trade policy actions implemented by the Trump administration. The proposed tariffs on U.S. imports could be materially significant, raising consumers’ costs of goods and services – potentially leading to rapid inflation. Thus, President Trump's trade policy actions can influence the price of precious metals such as gold and silver, as investors may seek these assets out to hedge against rising inflation.

From an industrial perspective, silver’s versatility as an industrial metal has elevated its demand in recent years. Silver has grown in importance as the world moves toward electrification due to its use in solar panels and electric vehicles. The Silver Institute, a nonprofit international association focused on increasing public understanding of silver’s many uses and values, recently reported that industrial demand for silver in 2024 was estimated to have surpassed 700 million ounces, a record achievement. The demand for silver is being driven by its increasing use in green technologies. As a result of this growing demand, there was a physical deficit for the fourth consecutive year.

Silver In 2024, And What May Lie Ahead

While silver’s economic and industrial utility are seminal factors for a rise in its demand, another consequential factor is the metal's scarcity. A majority of silver supply is a byproduct of lead, zinc, copper and gold production; silver's availability depends on the profit mines can garner from base metals, such as lead and zinc. As stated in the Silver Institute's World Silver Survey 2024, 71.7% of annual silver mine supply was produced as a by-product in 2023. While the share of silver produced from gold mines declined year-on-year, from 15.5% to 13.7%, the contribution from copper and lead/zinc operations rose from 25.5% to 26.7% and from 30.3% to 30.8%, respectively. The share of production from primary silver mines was unchanged year-on-year, accounting for 28.3% of mine output in 2023.

The increasing demand for and limited supply of silver seems to have created an elevated pricing environment. However, this price elevation does not mean that non-primary silver miners will pivot to meet this demand – as silver is not their primary focus due to it being a by-product offering. Thus, demand may not be satiated in the near term, and dedicated silver miners could potentially reap the benefits.

Investing In Silver With Sprott

To realize the potential of current market dynamics, investors may want to seek exposure to physical silver or to equities within the metal's supply chain. The Sprott Silver Miners & Physical Silver ETF is a pure-play solution focused on silver miners and physical silver. 

SLVR reflects the performance of the Nasdaq Sprott Silver Miners™ Index, which is designed to track the performance of securities in the silver industry, including silver producers, developers, explorers and physical silver. SLVR is the only silver ETF to provide focused exposure to silver miners and physical silver, Sprott says. Currently, because its index avoids silver-as-a-by-product miners, SLVR provides twice the exposure to silver relative to other silver mining ETF strategies, the company reports. 

Silver is a critical material used across a variety of advancing industries, including solar energy, AI, automotive technology and healthcare. Exposure to firms focused on producing silver or possessing physical silver could potentially benefit investors over time and may be worth looking into.

Featured photo by Scottsdale Mint on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice. 

1)  Based on Morningstar's universe of Precious Metals Sector Equity ETFs as of 14 January 2025.

2) The term "pure-play" relates directly to the fund's exposure to the total universe of investable, publicly listed securities in the investment strategy.

IMPORTANT DISCLOSURES & DEFINITIONS 

An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a Sprott Silver Miners & Physical Silver ETF Statutory Prospectus, which contains this and other information, visit https://sprottetfs.com/slvr/prospectus, contact your financial professional or call 1.888.622.1813. Read the Prospectus carefully before investing. 

The Sprott Silver Miners & Physical Silver ETF is new and has limited operating history. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund's shares and the possibility of significant losses. The Fund will be concentrated in the silver mining industry. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the silver mining industry, highly dependent on the price of silver bullion. The silver and precious metals industry can be significantly affected by competitive pressures, central bank operations, events relating to international political developments, the success of exploration projects, commodity prices, adverse environmental developments and tax and government regulations. An investment in the Fund involves a substantial degree of risk. The Fund is not suitable for all investors. The Fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund. 

Shares are not individually redeemable. Investors buy and sell shares of the Sprott Silver Miners & Physical Silver ETF on a secondary market. Only market makers or "authorized participants" may trade directly with the Fund, typically in blocks of 10,000 shares. 

Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual Fund operating expenses, affect the Fund's performance. 

The Sprott Silver Miners & Physical Silver ETF seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Nasdaq Sprott Silver Miners™ Index (NSLVR™). 

Nasdaq®, Nasdaq Sprott Silver Miners™ Index, and NSLVR™ are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by Sprott Asset Management LP. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S). 

Sprott Asset Management USA, Inc. is the Investment Adviser to the Sprott Silver Miners & Physical Silver ETF. ALPS Distributors, Inc. is the Distributor for the Sprott ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc. 

®Registered trademark of Sprott Inc. 2025.