GLD Losing To SLV In A QE3 World

Includes: GLD, SLV
by: Christian Magoon

SPDR Gold Trust (NYSEARCA:GLD) investors have been happy with gold's run upward recently. The rally, based off the hope for and realization of QE3, has pushed gold ETFs upward into double-digit territory for the year. Here's a snapshot of the physical gold ETF performance grid at

As of 9/20/2012 market close.

However, investors with a broader perspective on precious metals have found even better returns in silver over the last month. The largest silver ETF is the iShares Silver Trust (NYSEARCA:SLV) and it has handily outpaced its gold ETF counterpart, GLD, over the last month. Here's the chart from Google Finance.

As the chart shows, GLD gains of 9% pale in comparison SLV's 20% return over the last month. While silver will now receive a lot more attention from investors due to this recent out-performance, many won't bother to review the performance of silver year to date and that would be a mistake. SLV has had a volatile year, experiencing higher highs and lower lows than GLD. In fact, silver was coming off a more recent low than gold when speculation of QE3 began. This turbo charged silver, rocketing it past gold. Let's take a look at an annotated SLV and GLD charts year to date to see the differences. First the SLV chart from

Here's the year-to-date SPDR Gold Trust chart.

A few observations from the charts. First gold experienced about half the decline that silver did from February highs. Secondly gold rebounded sooner (mid May) off its low than silver (end of June). Finally as we mentioned earlier when reviewing the one-month performance comparison, SLV has seen a more material amount of appreciation from the QE3 rally.

For gold bugs, it is important to remember that silver has a lot going for it that gold does not. For example silver has a lower price point thus it is more accessible to investors in the physical market. Second because it has been more volatile than gold lately, silver appeals to traders and speculators. Finally silver has many different uses, mostly due to silver's unique properties. It is used in industrial applications, photography equipment and jewelry.

Unlike gold however, silver is not considered the premiere precious metal to be used as a store of value. Indeed central banks around the world purchase and then stock pile gold bars, not silver, as the precious metal of choice. For that reason alone, gold will continue to be the dominant force in the precious metals arena.

Trade Silver, Invest In Gold?

While SLV has outperformed GLD in the recent rally, it is likely more geared to speculators due to its volatility. GLD appears to offer traits that are more characteristic of an investment versus a trade. This is yet another reason gold appears to be the standard in precious metal investing and the larger asset base in ETFs.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Christian Magoon is Publisher of gold ETF site