Gold and silver ETFs might move up and down with the whims of the broader market, but make no mistake: these investments have wide range of appeal and applications for any investors.
The most recent swings in the prices of gold and silver were a direct result of market volatility created by the crisis in Europe. Now that the European Union has pulled together a $1 trillion rescue plan, silver and gold ETFs appear to be taking a breather. But that doesn’t mean you should stick a fork in them.
Barry James, who helps manage $2 billion at James Investment Research, says that gold “does well in periods of financial turmoil, so it is good to have some just in case.” Frank Lesh, a trader at FuturePath Trading LLC, remarks that investors are fleeing to the relative safety of gold as the currencies markets fluctuate.
Beyond that turmoil, these funds are far from irrelevant. Three of the biggest drivers of the prices of gold and silver outside of safe-haven investing are:
- Gold and especially silver have industrial uses. Gold is used in wiring and is an excellent conductor of electricity. Silver is also an excellent conductor of electricity and has antibacterial properties. It’s used in nearly any industry you can think of.
- Gold and silver, prized for beauty, are widely used in jewelry. Spikes in gold demand are often seen around Indian wedding season, when brides are gifted with large amounts of gold to ensure their financial security. September is the heaviest buying month.
- Commodities in general, and gold and silver specifically, are appealing in periods of high inflation. This is a period that many believe is coming sooner rather than later, thanks to hefty government spending.
Silver prices may continue to rise further on the back of gold’s strength, but the weakness in base metals could constrain gains in silver prices, according to CommodityOnline. Shyamal Mehta, Sr. Commodity Analyst with Commodity Online, calculated that silver is trading above 7, 14 and 20 days weighted moving averages, which he says signals an uptrend.
There’s no shortage of choices when it comes to ETFs that invest in gold and silver ETFs. You only have to decide how you want your exposure: miners, futures or physical bullion. Go here to learn about the differences in each.
- SPDR Gold Shares (NYSEARCA:GLD)
- ETFS Gold Trust (NYSEARCA:SGOL)
- iShares COMEX Gold (NYSEARCA:IAU)
- PowerShares DB Gold Fund (NYSEARCA:DGL)
- Market Vectors Gold Miners (NYSEARCA:GDX)
- Market Vectors Junior Gold Miners (NYSEARCA:GDXJ)
- iShares Silver Trust (NYSEARCA:SLV)
- ETFS Physical Silver (NYSEARCA:SIVR)
- PowerShares DB Silver (NYSEARCA:DBS)
- UBS E-TRACS CMCI Silver ETN (NYSEARCA:USV)
- Global X Silver Miners (NYSEARCA:SIL)
Max Chen contributed to this article.