Learn with ETMarkets: Why ETFs offer silver lining amid global uncertainty, inflation

Silver ETF has recently been added as an investment option after strong success seen in Gold ETFs. Currently, the Silver ETF has been doing well as silver underlying has given a good upside since hitting the low of August 2022. The price is up by more than 40% in domestic markets. And the upcoming trend in silver is expected to remain higher and will likely keep ETFs in demand.In times of economic uncertainty and rising inflation, investors seek refuge in assets that can withstand the eroding effects of a depreciating currency. Precious metals, particularly gold and silver, have long been recognised as hedges against inflation. In this context, Silver Exchange- Traded Funds (ETFs) offer a convenient and effective strategy for both novice and seasoned investors to harness the inflation-resistant qualities of these cherished commodities.

Beyond preserving wealth, Silver ETFs offer the potential for capital appreciation. As global demand for these metals continues to increase, driven by industrial and investment factors, ETF investors can realize substantial returns on their holdings.

In recent years, we’ve witnessed a growing interest in silver, not only as inflation hedges but as attractive investments. Factors like increasing industrial use, limited new discoveries of these metals, and growing interest from central banks and individual investors have contributed to their price growth.

Silver ETFs typically hold a diversified portfolio of these metals, reducing the idiosyncratic risks associated with individual assets. This diversification enhances the stability of the investment, ensuring that a downturn in one specific source does not result in significant losses.In contrast, holding a single silver bar could leave you vulnerable to the price fluctuations of that specific bar, but an ETF holds a mix of bars and coins, spreading risk and providing a more stable investment.

(The author is , Vice President Research Analyst at LKP Securities)(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)

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