Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Alix Steel joined NBR to explain what you should know before investing in gold or silver ETFs.(Watch video here.)NEW YORK ( TheStreet ) -- Silver and gold prices are hitting record highs, making physically backed exchange-traded funds very tempting investments. Before you buy, here's what you need to know. There are five physically backed ETFs traded in the U.S.: The biggest, SPDR Gold Shares ( GLD - Get Report); the cheapest, iShares Comex Gold Trust ( IAU - Get Report); the newest ETFS Physical Gold Shares ( SGOL and the two silvers, iShares Silver Trust ( SLV - Get Report) and ETFS Physical Silver Shares ( SIVR - Get Report). When you buy gold and silver physically backed ETFs, you do not own the physical metal, you own a paper representation. With respect to the gold ETFs, for every share you buy, you "own" one tenth of an ounce of gold; for silver, it's one ounce. The actual metal is stored by a custodian, usually one of the large banks like JPMorgan ( JPM or HSBC. The share-to-metal correlation erodes the longer you hold the shares. The fund must sell gold, for example, periodically to pay for expenses which decreases the amount of gold allocated to each share.
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