Precious metals investors have been on a wild ride this year, as
economies pulled back and forth and a number of major events had these
metals all over the board. This year saw the announcement of QE3,
QE4 and the re-election of president Barack Obama; all of which had big
implications for precious metals. But what many investors are concerned
about is not necessarily how these commodities performed as a whole,
but who outshined the rest. Below, we put the two most popular PMs, gold
and silver, head-to-head to see who took the crown in 2012 [for more
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As
far as 2012 is concerned, there is no comparison; SLV dominated its
larger counterpart. GLD was able to scrape up a handsome 9% on the year
(note that SPY is up about 16%), while SLV surged more than 20%. GLD may
take the spotlight away from its silver sister, but its performance
simply could not keep pace. In fact, SLV has outperformed in the
trailing one, three and five years, as it has been enjoying a nice, but
volatile, run higher [see also 3 Metals Outshining Gold].
Silver is known for its price volatility and often moves much more than gold. In the beginning of the year, silver surged ahead, only to fall well behind gold in the summer months. But as the year drew to a close, the white metal staged a strong rally to pass its competitor and leave it in the dust. Over the year, SLV and GLD maintained a correlation of about 0.94, but that number combined with a higher beta for SLV meant that the silver fund would often move in tandem with gold, but experience more intense swings in both directions.
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GLD vs. SLV
The SPDR Gold Trust (GLD) is not only the largest commodity ETF in the world, it is the second-largest exchange traded product period. Its physically-backed structure has thrust it into popularity as a long-term hold, but it also has a strong liquidity for active traders. The iShares Silver Trust (SLV) is easily the most popular silver fund, with more than $10 billion in assets and trading roughly 10 million shares each day. Both funds are juggernauts in the commodity world, and have outperformed each other over various time periods.As
far as 2012 is concerned, there is no comparison; SLV dominated its
larger counterpart. GLD was able to scrape up a handsome 9% on the year
(note that SPY is up about 16%), while SLV surged more than 20%. GLD may
take the spotlight away from its silver sister, but its performance
simply could not keep pace. In fact, SLV has outperformed in the
trailing one, three and five years, as it has been enjoying a nice, but
volatile, run higher [see also 3 Metals Outshining Gold].Silver is known for its price volatility and often moves much more than gold. In the beginning of the year, silver surged ahead, only to fall well behind gold in the summer months. But as the year drew to a close, the white metal staged a strong rally to pass its competitor and leave it in the dust. Over the year, SLV and GLD maintained a correlation of about 0.94, but that number combined with a higher beta for SLV meant that the silver fund would often move in tandem with gold, but experience more intense swings in both directions.
Moving Forward
With two different QE programs in place and the threat of inflation rising every day, it seems like now could be a great environment for precious metals. But major financial institutions aren’t quite so sure about a rosy outlook. A number of big banks and brokers have a weak outlook for gold, citing a global economy recovery that will lead to more “risk-on” investing and less of a need for these commodities. For now, all eyes will be on the fiscal cliff situation playing out in Washington as that will have the most immediate impact on these two ETFs.Read Full Article>>>