Silver hits new highs! How should Taiwanese investors seize investment opportunities in silver ETFs?

Comprehensive Analysis of the Silver Market

The silver market is set to experience a strong rally in 2025. On December 9th, London spot silver prices broke through the $60 per ounce mark for the first time, then continued to climb, reaching a historic high of $64.6/oz. Year-to-date, silver has gained over 100%, making it one of the best-performing assets this year.

This rally is primarily driven by expectations of Federal Reserve rate cuts, tight global silver supply, and the U.S. government listing silver as a critical mineral. Compared to gold, silver’s gains have exceeded 60%, and it has outperformed the NASDAQ Composite Index by about 20%, highlighting its outstanding asset allocation performance this year.

International investment bank UBS is optimistic about the future, raising its silver target price for 2026 to the $58–$60/oz range, with the possibility of further surges to $65/oz.

Why Invest in Silver via ETFs?

As silver heats up, many retail investors are considering how to participate. Compared to physical silver and futures trading, silver ETFs are increasingly popular among Taiwanese investors due to their ease of trading, high liquidity, and low costs.

What is a Silver ETF?

A silver ETF is an investment fund that tracks the price of silver. Investors do not need to hold physical silver; they can participate by purchasing fund shares. The fund’s net asset value (NAV) fluctuates with silver prices—rising or falling in tandem. Like stocks, silver ETFs are listed on stock exchanges and can be bought or sold anytime during trading hours.

Compared to physical silver, which requires storage and security, silver ETFs offer a more convenient way to participate in the market. Investors save on storage hassles and benefit from higher liquidity.

How Do ETFs Track Silver Prices?

Silver ETFs typically use two main strategies to replicate silver market performance. One is holding physical silver bars directly; the other is investing through derivatives like futures contracts linked to silver prices. Regardless of the method, the ETF’s NAV moves in sync with the spot silver price—if silver rises by 5%, the ETF’s value generally increases by about 5%, and vice versa.

Physical Silver vs. ETF: Practical Considerations for Investors

While physical silver offers a tangible “see and touch” advantage, actual investing involves several challenges. Storage costs include insurance and vault fees. Keeping silver at home risks oxidation, theft, or damage.

Additionally, physical trading is complex—investors must find reputable dealers, face bid-ask spreads of 5–6%, and incur costs for purity verification and authenticity checks, which can erode returns. Physical silver also has lower liquidity; selling quickly in emergencies can be difficult, and buyback prices vary across dealers.

In contrast, silver ETFs provide Taiwanese investors with an efficient alternative. They convert physical assets into financial products, allowing investors to buy or sell via securities accounts as easily as stocks. Liquidity far exceeds that of physical silver, and there’s no need to handle transportation or storage.

Mainstream Silver ETF Products in Taiwan

The market offers various silver ETFs, each with unique features. Investors should choose based on their risk tolerance and investment horizon.

Global Benchmark: SLV

iShares Silver Trust (SLV) is the largest and most well-known silver ETF worldwide, managed by BlackRock. Launched in April 2006, it has over $30 billion in assets. The fund holds physical silver, with JPMorgan acting as custodian. It employs a passive management approach—buying and selling minimal silver periodically to cover operational costs. The expense ratio is 0.50%, tracking the LBMA silver benchmark.

Leveraged Options: AGQ and ZSL

ProShares Ultra Silver (AGQ) aims to deliver twice the daily performance of the Bloomberg Silver Subindex via derivatives like futures, with an expense ratio of 0.95%. It’s suitable for short-term traders seeking amplified exposure. Due to compounding effects and leverage decay, AGQ is not recommended for long-term holding.

ProShares UltraShort Silver (ZSL) provides twice the inverse daily performance of the LBMA silver price (-2x), also with a 0.95% fee. It’s designed for traders hedging against silver declines or speculating on downward movements. Like other leveraged ETFs, ZSL is only suitable for short-term trading.

Physical Closed-End Fund: PSLV

Sprott Physical Silver Trust (PSLV), launched in October 2010, manages about $1.2 billion. Unlike traditional ETFs that create and redeem units to keep NAV aligned, PSLV issues a fixed number of shares, with market prices determined by supply and demand, often trading at a premium or discount to NAV. It offers pure physical silver exposure, with a fee of 0.62%. Investors can also redeem physical silver, making it suitable for long-term investors.

Mining Company ETF: SLVP

iShares MSCI Global Silver & Metals Miners (SLVP), launched in January 2012, manages around $600 million. It tracks global companies involved in silver exploration and mining, with a low expense ratio of 0.39%. It pays semi-annual dividends, with a yield below 0.5%. However, SLVP exhibits higher volatility, tracking errors, frequent component adjustments, and limited appeal from a return perspective, with wider bid-ask spreads.

Taiwan-listed Option: Qian Yuan Dadao Silver (00738U)

Established in May 2018 and listed in June, this ETF tracks the Dow Jones Silver Excess Return Index. It invests in COMEX silver futures to achieve its tracking goal, with a management fee of 1%. It’s rated as “high volatility” and does not distribute dividends.

How Can Taiwanese Investors Purchase Silver ETFs?

Option 1: Discretionary Trust — Mainstream and Safe

Investors can trade via domestic brokers (Fubon, Cathay, Yuanta, Yuanta, etc.) through overseas brokers, which is the main method for investing in international silver ETFs.

Process: Open a discretionary trust account with a domestic broker (online or in person), prepare ID and bank info; choose TWD or foreign currency settlement; place orders via broker app or website using ETF codes (e.g., SLV). Many brokers support regular fixed investments.

Advantages: Regulated by the Financial Supervisory Commission, ensuring safety; tax handling (e.g., withholding tax on dividends) is managed by the broker; funds stay in Taiwan, reducing risk.

Disadvantages: Higher transaction fees; limited ETF choices.

Option 2: Direct Overseas Account — Lower Cost

Open an account directly with an overseas broker online, saving intermediary fees and reducing costs.

Process: Register on the overseas broker platform, prepare passport, ID, proof of address, bank info; transfer funds (TWD to USD via wire transfer, with prior account setup); place orders via app or website.

Advantages: Very low fees (many brokers offer commission-free or low fixed fees); access to a wide range of global ETFs; support for advanced trading tools like options and margin trading.

Disadvantages: Some platforms are only in English; tax and remittance are self-managed (e.g., 30% US dividend withholding tax must be declared for refunds); funds transferred abroad face legal and risk considerations.

Tax Considerations for Silver ETFs

Tax implications for Taiwanese investors depend on ETF type and income source. Since most silver ETFs are commodity-based and non-dividend-paying, U.S. withholding tax and Taiwan dividend tax are less relevant.

Taiwan-listed Silver ETFs: Treated like Taiwan stocks—buying is tax-exempt; selling incurs a 0.1% tax.

Overseas-listed Silver ETFs: Gains from U.S. silver ETFs are considered foreign property transactions, included in overseas income. If total overseas income ≤ NT$1 million annually, it’s exempt from minimum tax; exceeding that, the full amount is included in taxable income, with a 20% tax rate on the excess after deducting a NT$7.5 million exemption.

If investors incur capital losses, they may offset gains under certain conditions, which is a valuable tax benefit.

Overview of Silver Investment Methods

Various approaches exist, each with pros and cons.

Silver ETFs: Offer high liquidity, ease of trading, no storage needed, low costs, and no theft risk—ideal for beginners. However, fees can erode long-term returns, and no physical ownership means potential tracking errors. In 2025, expected returns are slightly below the pure silver price increase, around 103% net of fees.

Physical Silver Bars: Provide tangible ownership and security, but storage costs (1–5% annually), theft risk, low liquidity, and high premiums/commissions (5–6%) reduce net returns. After accounting for premiums, storage, and transaction costs, net gains in 2025 are about 95–100%. Better suited for long-term holding than short-term trading.

Silver Futures: Leverage allows controlling large positions with small capital, supporting bullish and bearish strategies. High risk—leverage can amplify losses up to total capital. If correct, 2x leverage could yield over 200% in 2025; if wrong, losses are similarly magnified.

Silver Mining Stocks (e.g., SIL ETF): Offer leverage through company growth, with 2025 gains around 142%, outperforming pure silver. However, they involve operational, regulatory, and cost risks, with higher volatility.

Risks of Investing in Silver ETFs

Despite high liquidity and accessibility, silver ETFs carry notable risks.

Price Volatility: Silver prices fluctuate more than gold and stocks. In 2025, gains exceed 100%, but historical sharp corrections are common, risking short-term losses. Suitable for investors with higher risk tolerance.

Tracking Error: Futures-based ETFs may underperform spot due to roll costs; physical ETFs face annual expense ratios (0.4–0.5%) that gradually erode returns.

Currency and Tax Risks: Overseas ETFs expose investors to exchange rate fluctuations and tax complexities, including foreign income tax obligations.

Market Influences: Silver prices are affected by geopolitical events, industrial demand (solar, electronics), and monetary policies, making precise prediction difficult.

Conclusion

From an asset allocation perspective, silver ETFs are practical tools for investors wanting exposure to silver. They address storage and delivery issues inherent in physical silver, offering liquidity and trading convenience—especially suitable for those avoiding physical management costs.

However, investors should recognize the high volatility of silver prices, influenced by industrial demand and market sentiment. Different silver ETFs vary in management fees, tracking methods (leveraged or physical), and structure. Diversification and regular review of market conditions and personal risk appetite are recommended to ensure alignment with investment goals.