This Day On The Street
Continue to site
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

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.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GLD $122.07 -0.11%
SLV $16.51 0.12%
GDX $24.18 3.29%
PSAU $20.62 3.00%
EWC $24.15 -0.04%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs