Text size

How's this for not talking your book? The company behind the biggest silver ETF says it's not a great time to invest more money in the metal.

Russ Koesterich, chief investment strategist for BlackRock (BLK), parent to ETF heavy iShares and its $6.8 billion iShares Silver Trust (SLV), argues in a blog post published this week that silver's recent price jump -- 12% from last month's lows -- is in part simply a reflection of the metal's outsized volatility.

Bloomberg

Another factor is early 2014's surprising, and perhaps unsustainable, drop in interest rates. "I expect real rates to start to back up in the second half of 2014," Koesterich writes. "This suggests a tougher second half for precious metals, particularly for gold, which has historically had the stronger relationship with real rates." (Oh, right: iShares also makes iShares Gold Trust (IAU), the top competitor to gold-market Godzilla SPDR Gold Trust (GLD).)

Other reasons, per Koesterich, not to bet the farm on silver: "valuing commodities is notoriously difficult," what with their lack of dividends and earnings. The silver-to-gold price ratio is relatively close to the historical average, suggesting silver isn't mispriced, at least versus gold.

Why make a warning like that right now? That's easy: The 12% jump in just a few weeks is bound to convince some investors it's easy money.

A few other reasons: The 20%+ one-month gains in overlooked ETFs such as PureFunds ISE Junior Silver ETF (SILJ) and iShares MSCI Global Silver Miners ETF (SLVP), and the $260 million Global X Silver Miners ETF (SIL).

Or the 34% surge in the thrice-leveraged silver betting tool VelocityShares 3X Long Silver ETN (USLV), and 21% rise of ProShares Ultra Silver (AGQ). The closed-end Sprott Physical Silver Trust (PSLV) is ahead by nearly 12%.

Koesterich, who advises investors keep a "small" allocation to precious metals, sums it up: "[B]oth silver and gold are vulnerable to higher real rates, neither looks particularly mispriced, and investors in silver will need to contend with a lot of volatility."