Options After Silver Prices Hit Record Highs: A Complete Analysis of Silver ETF Premiums and Discounts

In 2025, the silver market stirred up waves, with the international silver price soaring to a historic high of $83.645 per ounce, up more than 140% so far this year, making it the most outstanding commodity performance. As expectations of the Federal Reserve cutting interest rates, global supply tensions, and silver being included in the US critical mineral list emerged successively, retail investors turned their attention to this “Silver Frenzy.”

However, after CME raised futures margin requirements twice in a row and silver prices temporarily retreated to the $70-75 range at the end of the year, many investors began to consider: how can I participate safely and effectively? Silver ETFs, due to their convenience and low entry barrier, are gradually becoming the new favorite among small investors in Taiwan.

Silver Bull Market Fever: Why Choose ETFs Instead of Physical Silver Bars?

Compared to the cumbersome process of holding physical silver, the advantages of silver ETFs are self-evident. Buying physical silver bars involves annual storage and insurance costs of 1-5%, and when buying or selling, you face a 5-6% premium and transaction fees. Not only is liquidity low, but it’s also difficult to quickly liquidate in urgent cash needs. Additionally, transportation and authentication issues can be headaches.

Silver ETFs offer a completely different investment experience. You can trade easily through a brokerage account just like stocks, without worrying about storage issues, and they have far better liquidity than physical assets. More importantly, whether it’s funds tracking physical silver (like SLV) or futures-based products, ETFs can effectively replicate silver price movements, allowing investors to enjoy market gains while shedding the heavy burden of physical assets.

Common Silver ETF Comparisons: Fees, Operations, and Features

There are many silver ETFs on the market, each with its own characteristics. Here is a summary of the core features of seven mainstream funds:

SLV (iShares Silver Trust) is the largest globally, managed by BlackRock, with net assets exceeding $30 billion. The fund directly holds physical silver, custodied by JPMorgan Chase, with an annual fee of only 0.50%. Launched in 2006, it is favored by retail and institutional investors for its straightforward tracking method and low fee.

DBS (Invesco DB Silver Fund) tracks silver prices via COMEX futures with an annual fee of 0.75%, suitable for those preferring futures exposure without high-frequency trading.

AGQ (ProShares Ultra Silver) and ZSL (ProShares UltraShort Silver) offer 2x leveraged long and short exposure respectively, with annual fees of 0.95%. These are advanced tools, not recommended for beginners or long-term holders, as long-term leverage decay can erode returns.

PSLV (Sprott Physical Silver Trust) is a closed-end fund with a scale of $12 billion, with an annual fee of 0.62%. Its unique feature is allowing investors to redeem physical silver, satisfying those who prefer tangible assets. However, note that the trading price often exhibits premiums or discounts due to market supply and demand, with premiums sometimes reaching 5-10%. Investors should buy when premiums are low to maximize returns.

SLVP (iShares MSCI Global Silver and Metals Miners) takes a different approach by investing in global silver mining companies rather than physical silver or futures. Its management fee is only 0.39%, the lowest in the industry, with a 2025 return of about 142%, surpassing pure silver price gains. From another perspective, this also means higher volatility and operational risks of mining companies.

Taiwan-listed ETF “Dow Jones Silver Excess Return Index” (00738U) tracks the Dow Jones Silver Excess Return Index, with an annual fee of 1%, achieved via COMEX futures. As a local ETF, it offers the simplest tax treatment (0.1% selling tax), but also exhibits high volatility.

ETF Premiums: Why Sometimes Prices Are Higher Than Net Asset Value?

Investors often overlook an important phenomenon: the trading price of ETFs is not always equal to their net asset value (NAV). This is especially true for closed-end funds like PSLV, where premiums and discounts are more pronounced.

When market investors flood into silver ETFs, demand exceeds supply, causing the trading price to rise above NAV, creating a premium. Conversely, during bearish market sentiment, investors rush to sell, and the price can fall below NAV, resulting in a discount. This can significantly impact investment returns—buying at a high premium means paying more, and even if silver prices rise, returns may not meet expectations.

For example, during the hot silver market period, PSLV premiums sometimes reached 10%. Open-ended ETFs like SLV, with creation and redemption mechanisms, usually have minimal premiums or discounts, generally within 0.5%, which is one reason for their popularity.

How Can Taiwanese Investors Purchase: Discretionary Trust vs. Overseas Brokers

Discretionary trust (Dai-Wei) remains the main choice. Investors open accounts with domestic brokers (such as Fubon, Yuanta, Cathay, etc.) and place orders for overseas silver ETFs. The process is simple: online application, choose TWD or foreign currency settlement, search for the code via app, and many brokers support regular investment plans. Advantages include protection under Taiwan’s Financial Supervisory Commission, tax assistance from brokers, and no need to transfer funds abroad. Disadvantages are higher transaction fees and fewer available funds.

Overseas brokers like IB, Firstrade, Webull, etc., offer lower fees and more options. Investors need to prepare passport, ID, proof of address, and bank details for online account opening. After remittance, they can trade global assets. Benefits include very low or zero commissions, a wide range of products, and advanced tools. However, they require handling English interfaces, foreign exchange taxes, offshore estate issues, and lack legal protection under Taiwanese law.

Tax Considerations: TWD vs. USD Tax Burden

Buying Taiwan-listed silver ETFs (like “Dow Jones Silver Excess Return Index”) is simplest tax-wise: no tax on purchase, only 0.1% tax on sale.

Investing in overseas silver ETFs is considered foreign property transaction income, included in overseas income. The key threshold is 1 million TWD: if total overseas income for the year is ≤1 million, it’s exempt from minimum tax; if exceeding, the entire amount is included in basic income, and after deducting the 7.5 million TWD tax exemption, the excess is taxed at 20%. Since most silver ETFs do not pay dividends, withholding tax issues are minimal.

Comprehensive Comparison of Silver Investment Methods: ETF, Physical, Futures, Mining Stocks—How to Choose?

Different investment tools have their own advantages. Physical silver bars provide tangible ownership and crisis protection but involve high storage costs, poor liquidity, and premiums/fees. Silver futures can leverage returns—if the judgment in 2025 is correct, using 2x leverage could yield over 200% profit—but risks are amplified; wrong directions could wipe out the principal, unsuitable for beginners.

Silver mining stocks (like SIL) achieved a 142% increase in 2025, outperforming pure silver price gains, as mining companies profit more when silver prices rise. However, these stocks are affected by mine operations, regulatory policies, and cost fluctuations, with higher risks, suitable for growth-seeking investors who can tolerate volatility.

Silver ETFs strike a middle ground: returns are lower than futures and mining stocks but far better than physical silver, with lower risk and the best liquidity, making them ideal for beginners and small investors to enter and exit quickly. Annual fees are about 0.39-1%, much cheaper than physical silver’s 1-5%.

Risks to Watch When Investing in Silver ETFs

Despite promising prospects, silver ETFs carry several risks. First is price volatility: silver prices fluctuate far more than gold or stocks. In 2025, despite a 140% rise, historical deep corrections of 30-50% are common. After the margin increase on December 29, silver prices once plunged over 11% intraday, showing their volatility.

Second is tracking errors and fee erosion. Futures-based ETFs are affected by roll costs, often resulting in returns below spot prices over the long term; even physical ETFs with annual fees of 0.4-0.5% accumulate and reduce gains over time.

Third is ETF premium/discount risk. Especially for closed-end funds like PSLV, high premiums can be a form of self-punishment.

Finally, currency and tax risks for overseas ETFs. Plus, silver prices are influenced by geopolitical, industrial demand, and monetary policies, adding many variables.

Conclusion

Silver ETFs provide a convenient investment gateway, allowing retail investors to participate in silver price movements without the hassle of physical management. When choosing funds, prioritize factors like annual fees, premium/discount levels, and liquidity. SLV, due to its large scale, lowest fees, and minimal premiums, is most friendly for most investors; PSLV suits those with a long-term horizon and tolerance for premium fluctuations; Taiwan-listed “Dow Jones Silver Excess Return Index” offers local tax advantages.

Regardless of choice, diversification, avoiding over-concentration, and regular market review are key strategies. Silver shines brightly, but it’s essential to recognize its volatility. Only with prudent investment mindset can you navigate this market and come out ahead.