Silver ETF (SLV) makes impressive debut

Friday, May 28, 2006
By Benjamin Train

Today marked a strong point of interest in the Precious Metals sector. The long awaited Silver ETF began trading at 7:30 am at $129 a share and ended the day at $ 138.12 a share a $ 9.12 change, or more than 7% percent gain on the American Stock Exchange with more than 2.3 million shares.

I have expectations that we will see a pull-back next week and continued volatility, however the silver sector is now on a new footing. Silver supplies fell 663,216 troy ounces to 123.6 million troy ounces. Each share of the silver ETF represents 10 ounces of the metal held in a vault. The more iShares purchased, the more ounces of silver off the maket, creating higher contract prices due to increased demand.

According to Dale Doelling, Chief Mmarket Technician at Trends In Commodities; "the precious-metals markets are experiencing significantly higher volatility than we've seen in quite some time, and that can signal that a retracement may be in the offing," "But it's looking more like a consolidation at this point and, barring an all-out collapse, the trends in all of the metals markets remain favorable," he said.

SLV is the first silver exchange-traded fund in the U.S. (SLV : iShares silver trust iShares
News , chart, profile, more Last: 138.12+9.12+7.07%) 4:26pm 04/28/2006 Delayed quote data

The Silver Trust, sponsored by ETF giant Barclays Global Investors, has been in the works for more than a year. The ETF is backed by 1.5 million ounces of silver, deposited by Barclays earlier this week.


I have pasted some excerpts from a
MarketWatch article here that I felt you might like to read.

Shares of a highly anticipated silver exchange-traded fund rose as much as 8% in their first day of trading Friday as investors embraced a new way to capitalize on increasing global demand for the grey metal.

Some traders are expecting the ETF may usher in a new bull market for silver if it attracts money from individuals, advisers, institutions and hedge funds looking for a convenient way to get exposure to the precious metal.

If the silver ETF experiences demand similar to the gold ETFs, it may end up accumulating roughly 97 million ounces, which represents more than 15% of known silver inventories, making a tight market even tighter, the newsletter added.

However, if history is any guide, the trend with gold ETFs introduced around the globe has been a run-up in the weeks up to the launch with a pullback in the weeks after the start of trading. See earlier story.

Judging by investor confusion over the tax issues with the existing gold ETFs, it should be noted silver, like gold, is classified as a "collectible" by the IRS -- if held for more than one year, gains are taxed at a 28% rate, compared with the 15% rate applicable to most other long-term capital gains.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BA3962FD2%2D20D6%2D48C5%2D80FC%2DBB96523D9196%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo