New ETFs Track Global Silver, Copper Stocks

Global X launched two new commodity ETFs on the NYSE Arca today.

The Global X Silver Miners ETF (SIL) is the first ETF to focus on silver mining companies. The iShares Silver Trust (SLV), which launched in 2006, holds the actual physical commodity silver in its fund. The new Global X ETF tracks the Solactive Global Silver Miners Index, a market capitalization-weighted index holding the equities of the largest and most liquid silver mining companies in the world.

“At the beginning of a bull market, it is well documented that mining shares typically rise, and often outperform bullion,” said Nick Barisheff, President of Bullion Management Group Inc., in a written statement. It is true that both gold and silver stocks provide leverage over the price of the actual metal, and hence, more profit potential. Of course, leverage can cut both ways. It increases losses too.

The majority of the ETF’s holdings are Canadian-based companies, but companies in the U.S., Mexico, Peru, and Russia are also represented. As of March 31, the largest index components were Fresnillo, Industrias Penoles, Silver Wheaton, and Pan American Silver. Unlike gold, silver is both an investment asset and offers industrial and consumer applications. According to BMO Capital Markets, 54% of silver demand is industrial and that demand is expected to rise 19% this year. Global X quotes commodities analysts saying silver demand should remain strong as a result of both investment interest and increased use in the consumer and industrial sectors.

The Global X Copper Miners ETF (COPX) follows the Solactive Global Copper Miners Index, a market capitalization-weighted index containing stocks from the largest and most liquid copper mining companies in the world. Most of the companies in the fund are based in Canada, Australia, the United Kingdom, U.S. Mexico, China, Poland, Switzerland, and South Africa. As of March 31, the largest index components were Freeport-McMoran, Xstrata, Grupo Mexico, and Southern Copper. According to a 2009 study by CIBC World Markets governments are expected to spend approximately $30 trillion on infrastructure projects over the next 20 years, with copper being a large component of the materials used in infrastructure. China is currently the world’s largest consumer of copper. Barclays Equity Research predicts China will use 15.6 billion pounds of copper each year by 2015. Both funds have an expense ratio of 0.65%.


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