NEW YORK ( TheStreet) -- Both bulls and bears have been flocking to precious metals ETFs such as the iShares Silver Trust (SLV) and Market Vectors Gold Miners (GDX) to exit currency holdings and fight inflation fears.
The list of silver and gold exchange-traded products continues to grow, and it has become increasingly important for investors to understand these different types of products as regulation shapes the industry.
No matter which way you think the market is headed, there are compelling reasons to gain exposure to gold. Bulls can use gold as protection against inflation, and in case the dollar weakens as the stock market surges. Bears can turn to gold to protect their capital against market downswings.
Silver, the more volatile of the two metals, tends to soak up the spill-over from its yellow counterpart. Silver may not always follow an upswing in gold, but high inflation fears will drive investors to both. In addition to currency protection, silver also has uses as an industrial metal.As the Commodities Futures Trading Commission investigates the role that futures-based commodity funds have on the markets they track, investors need to be aware of which type of ETF they buy. Futures-based gold and silver funds could be profoundly affected by new position limits, while physical and equity-based funds are unfazed.
Physical ETFsThese funds track the value of gold by holding physical gold and silver in storage. As assets in the funds increase or decrease, fund managers will adjust their stocks of bullion accordingly. Physical gold ETFs also have a higher tax rate than many of their peers: they are taxed as collectibles, with a 28% percent long-term capital gains rate.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV