Buying physical silver sounds simple until you run the numbers. Walk into a precious-metal dealer today and you might pay a 2% premium to buy a silver bar. Turn around and try to sell it back immediately and you could lose another 2% on the dealer’s buyback price.
That bid-ask spread is how dealers earn a profit, and it creates an instant loss for you before silver even moves. Add storage issues and potential taxable gains, and physical silver becomes far less convenient than it looks.
Silver funds avoid these problems. They trade with spreads as low as $0.01, require no storage, and are eligible for registered accounts like the Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), and First Home Savings Account (FHSA). Here are two strong options: one is a closed-end fund (CEF) and the other is an exchange-traded fund (ETF).
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Silver CEF
The Sprott Physical Silver Trust (TSX:PSLV) is one of the most popular ways for Canadians to get silver exposure without touching physical bars.
It launched in October 2010 and is structured as a CEF, which means its units trade independently of the fund’s underlying net asset value (NAV). When buying pressure builds, the market price can rise above NAV (a premium).
When selling pressure dominates, the price can fall below NAV (a discount). As of November 18, the trust trades at a –3.8% discount, meaning you can buy its silver exposure slightly below its intrinsic value.
This discount/premium feature exists because CEFs do not use the same in-kind creation/redemption mechanism that ETFs rely on to keep prices aligned with NAV. Even though the structure adds complexity, the trust remains extremely popular, with 10.4 billion in silver assets held.
The fund holds 204,605,154 ounces of fully allocated, unencumbered London Good Delivery (LGD) silver bars. Fully allocated means each bar is specifically identified, held in segregated storage, and not loaned out or used as collateral by anyone else.
Custody is handled by The Royal Canadian Mint, and the holdings are independently audited by KPMG, one of the Big Four accounting firms. There are 595,880,890 units outstanding, so each unit represents roughly 0.34 ounces of silver.
The trust charges a 0.57% management expense ratio (MER), which is lower than many competing physical silver products but higher than modern ETFs. Since CEFs can trade at discounts or premiums for long periods, investors should be comfortable with potential price deviations from the underlying metal.
Silver ETF
The iShares Silver Bullion ETF (TSX:SVR) is the more conventional option. Unlike a CEF, this fund uses the ETF structure to keep its market price closely aligned with NAV through in-kind creation and redemption.
It provides exposure to the price of physical silver, but with one twist: it is hedged to the Canadian dollar, which minimizes the impact of CAD–USD currency movements on returns.
The fund currently holds 129.9 tonnes of silver, equal to about 4,174,997.78 ounces, against 12,500,000 shares outstanding. Each share therefore represents roughly 0.33 ounces of silver.
It charges a 0.66% MER, which comes to $66 per $10,000 invested annually. Like the CEF, it pays no dividends, making it generally tax-efficient. However, it has the added benefit of being eligible for all major registered accounts, including the TFSA, RRSP, and FHSA.
Because it trades like a normal ETF, the bid–ask spread is extremely tight, often just one cent, and there are no dealer premiums or storage headaches to worry about.
