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This Investment Lets You Convert Your Units to Actual Silver Bars

After a dismal year, Real Money's Jonathan Heller offers an unusual way to play the precious metal.

With 2022 already a shaky proposition, The Street’s Jonathan Heller is turning to the commodities market for some stability, with silver at the top of his post-holiday shopping list.

“Coming up with a single best idea for next year is a bit of a crapshoot, especially in this wacky environment,,” Heller said in Real Money recently. “That said, I’m surprised by the way silver performed in 2021." He noted that the spot price fell about 14% for the year in an inflationary environment. 

Even so, there’s still investor demand for physical silver, especially given the premiums for so-called "junk" silver (non-numismatic silver coins minted in 1964 and prior). “While the spot price of silver hovers just under $23 an ounce, a $100 bag (face value, which contains about 71.5 ounces) of junk silver will cost you about $2,100. That equates to around $29.37 an ounce, a 29% premium to the spot price.”

Heller believes there will be “plenty of uncertainty in 2022,” with the extent and duration of inflation being one of the contributors. In that scenario, uncertainty could create a good set-up for "poor-man's gold" in 2022.

Heller has an idea for that, too.

“One interesting way to get exposure to silver is via the Sprott Physical Silver Trust  (PSLV) - Get Free Report,” Heller said. “Each unit of PSLV represents 0.3567 ounces of silver, and the silver bars that fully back the trust are stored at the Royal Canadian Mint. As of last Thursday, PSLV traded at a 3.08% discount to net asset value (NAV).”

While owning PSLV isn’t the same as owning a physical metal that you can hold in your hand, there’s an interesting kicker here. Unit holders can redeem their shares for silver bars.

“Now, the minimum redemption is for 10 1,000-ounce bars, which would equate to about 28,035 shares of PSLV, so redemption is off the table for most investors,” Heller noted. “However, the notion that redemption is an option, along with the current discount to NAV, makes PSLV an interesting way to obtain silver exposure without buying the physical metal.”

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