NEW YORK ( TheStreet) - Precious metals have fallen into focus as commodity prices head higher and political unrest sweeps North Africa and the Middle East.
In particular, silver and gold have taken center stage as demand for defensive assets drives both resources to breathtakingly high levels. Though staggering at the start of this week, they have shown no signs of slowing.
Thanks to exchange traded funds, precious metals have become as easily accessible to retail investors as stocks and bonds. Investors can gain access to a physical stockpile of these shiny metals through funds such as the iShares Gold Trust (IAU) and the iShares Silver Trust (SLV).
In response to the upward action from gold and silver, both IAU and SLV have become attractive investment destinations. Though enticing, it is important to avoid blindly diving into either of these funds.Rather, by appropriately spreading exposure across these shiny metal ETF options, investors can both capture the upside potential of gold and silver while getting protection from the risk of downside. The closely monitored gold-silver ratio has tumbled in recent months and is now sitting around 40. This decline indicates that, while gold is flirting with brand new all time highs, it has been a noticeable laggard compared to silver. These two metals boast different qualities which can help to explain this divergence. Sweeping strength across the commodities spectrum, combined with the fact that economic healing has taken hold in many regions of the globe has helped push silver into the spotlight. Although this metal is often turned to in times of uncertainty, silver is also used extensively by a number of industries. Therefore, this metal is also influenced by the action taking place across the broader market. Gold, on the other hand, tends to see its strongest performance when fear takes over and demand for risk wanes. The yellow metal has far fewer industrial uses than silver and therefore moves independently of the global marketplace. The conditions we have seen so far this year have benefitted silver. However, this does not mean that piling into SLV is the strongest or surest strategy going forward.
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