McCall’s Call: All That Glitters Is Not Gold

September 22, 2010

When it comes to precious metals ETFs, gold is just one of a growing number of options.

The meteoric rise of gold to a new all-time high, combined with the massive amounts of media coverage of the yellow metal, has the gold bugs buzzing and their pockets growing with cash. But, as well as gold has performed in 2010, it’s not the only precious metal experiencing a boost in demand.

Matthew D. McCallThere are others, including silver, platinum and palladium that serve not only as safe-haven bets when markets are roiled by uncertainty, but also have far more industrial applications than gold.

That means investments in these other precious metals, unlike gold, take on a whole new dimension once the economy starts growing and demand for industrial materials starts ramping up.

Best of all for investors, precious metals are more and more available in an ETF package, which makes insulating portfolios from the vagaries of a world in upheaval a little easier every day.


Gold’s little cousin silver is starting to garner more attention from investors as it nears a 30-year high.

The iShares Silver ETF (NYSEArca: SLV) is up 22 percent year-to-date versus a gain of 16 percent for the SPDR Gold ETF (NYSEArca: GLD). Even more interesting are the comparisons when looking at the performance going back to the beginning of 2009. Since that time, GLD has gained 44 percent as SLV rallied 80 percent.

Silver is an interesting play because it doesn’t have the allure of gold, but it can be considered a poor man’s alternative to buying gold. Gold is now about $1,150 an ounce, while silver can be had for a mere $21 an ounce. Silver also has multiple applications, for example, in the auto industry, health care sector and water purification.

Other than SLV, currently the most popular silver ETF on the market, there are other options for investors who would like exposure to the silver sector. The alternative for an ETF that is physically backed by silver bullion is the ETFS Physical Silver Shares (NYSEArca: SIVR). With a net expense ratio of 0.30 percent it’s less than SLV’s 0.50 percent price.

When the price of the commodity rises, the value of the related mining companies typically does even better and vice versa when the price of the commodity falls. If the strategy is to ride the rally in silver, there’s the Global X Silver Miners ETF (NYSEArca: SIL). The ETF charges an expense ratio of 0.65 percent and invests in a basket of 25 global silver mining stocks. There’s a heavy concentration on Canada and
as the two North American countries make up 80 percent of the allocation. Since the end of June, SIL is up 22 percent and SLV has added 11 percent; the leverage is clearly defined with the mining ETF.

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