ETF Talk: Polishing up Silver

With inflation fears weighing on many investors’ minds during recent months, gold has become a useful hedge. But silver’s performance this summer proves that gold is not the only way to invest profitably in precious metals.

Increased government spending has caused the U.S. dollar to depreciate, and investors are turning to exchange-traded funds (ETFs) to protect their hard-earned money. One way to do this is by investing in precious metals such as silver and gold that are not linked directly to the U.S. dollar. Indeed, the performance of silver has continued to shine even though the dollar started to recover during July. In contrast, the price of gold has begun to weaken with the U.S. dollar starting to rebound.

There are good reasons why silver is retaining its luster. First, silver is less expensive to buy than gold. Second, silver benefits from rising industrial usage. Since silver is an electrical and thermal conductor, it is deployed in high-performance electronics and high-voltage circuits. Silver also has anti-bacterial properties that allow it to be used in the medical and water purification industries. In addition, the precious metal often is relied upon in food packaging and in solar panels used to provide alternative energy.

So when inflation threatens, silver offers a safe haven. Even when inflation worries subside, silver still retains appeal due to its many uses.

If you’re attracted to silver, you might want to consider iShares Silver Trust (SLV). The trust is intended to reflect the price of silver, less expenses and liabilities. Although the trust is not an exact equivalent of an investment in silver, it lets investors participate in the rise of the silver market. It certainly can pay off, as SLV is up 19.46% so far this year.

Subscribers to my ETF Trader service already have received the benefits of holding a silver ETF this summer. We bought and sold Ultra Silver ProShares (AGQ) for a short-term profit in July.

For those of you who want advice about which ETFs to buy and sell, check out my ETF Trader service by clicking here. As always, I am happy to answer your questions about ETFs. To send me a question, please click here. You may just see your question covered in a future ETF Talk.