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.
Here are two gold ETFs: SPDR Gold Shares ( GLD) and iShares COMEX Gold ( IAU). There is no difference between the funds except that GLD has 30 times the assets and volume of IAU. While GLD is larger, both funds have high liquidity. Investors can buy and sell shares of both GLD and IAU near their underlying values.
The gold products include PowerShares DB Gold ( DGL), ProShares Ultra Gold ( UGL) and ProShares UltraShort Gold ( GLL). The silver products include PowerShares DB Silver Fund ( DBS), ProShares Ultra Silver ETF ( AGQ) and ProShares UltraShort Silver ETF ( ZSL). PowerShares DB Gold and Silver use Deutsche Bank's Optimum Yield Index, which aims to maximize gains from backwardation (futures prices lower than spot prices) and minimize losses from contango (futures prices higher than spot prices). ProShares funds are leveraged and deliver double the daily change in prices.