This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Gold as an Investment, Silver as a Trade

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (The FRED Report) -- Here at The FRED Report we have been advocating gold as an investment for the last two years. On our weekly FRED Report conference call today, we highlighted our current thoughts. Readers can listen and watch the video recording, but we also review the concepts below.

Historically, the metals' markets are much healthier when gold is outperforming. Another way of looking at this is to say that silver is the more speculative metal. Silver has more industrial uses and these tend to impact price. We saw the result of silver out-performance in April of this year when metals and commodities pulled back sharply.

There have been other instances, though -- the best one that springs to mind is the last secular peak in the metals in 1980 -- as the Hunt brothers tried to corner the market in silver (and the reason they did this was pure speculation at the end of a long-term up-move in the metals and inflation). We consistently warn that when silver starts to outperform we are in a dangerous period for commodities in general, and metals in particular.

This is more of a condition indicator rather than a timing tool: Silver outperformed for several months before the blowup came, and this gave lots of opportunity to lighten up on commodities. We did this in spite of a long-term, bullish stance on the commodity markets. Right now, since gold has hit new highs we judge it to be outperforming, although on any given day silver may be better for aggressive traders.

The way we look at it is: if we bought the high trade in the Silver Trust iShare (SLV) in April we paid 48.35 and it is now around 39.17: a loss of 9.18. Whereas, if we bought the high trade in the SPDR Gold Trust (GLD) we paid 153.03, and it is now 157.19: a gain of 4.16. Our point is gold is a better and more stable investment. We show weekly charts of GLD and SLV, below.

Stock quotes in this article: GLD, SLV, GG, SLW, PSAU, GDX, EWA, FXA, EWC, FXC 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,500.69 -0.96 -0.01%
S&P 500 1,877.28 +1.89 0.10%
NASDAQ 4,142.9270 +15.96 0.39%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs