GLD vs. SLV: 2012 In Review

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Silver is known for its price volatility and often moves much more than gold. In the beginning of the year, silver surged ahead, only to fall well behind gold in the summer months. But as the year drew to a close, the white metal staged a strong rally to pass its competitor and leave it in the dust. Over the year, iShares Silver Trust (NYSEARCA:SLV) and SPDR Gold Trust (NYSEARCA:GLD) maintained a correlation of about 0.94, but that number combined with a higher beta for SLV meant that the silver fund would often move in tandem with gold, but experience more intense swings in both directions.

Moving Forward

With two different QE programs in place and the threat of inflation rising every day, it seems like now could be a great environment for precious metals. But major financial institutions aren’t quite so sure about a rosy outlook. A number of big banks and brokers have a weak outlook for gold, citing a global economy recovery that will lead to more “risk-on” investing and less of a need for these commodities. For now, all eyes will be on the fiscal cliff situation playing out in Washington as that will have the most immediate impact on these two ETFs.

As we move into 2013, precious metals could be set to continue their strong momentum or they could suffer a correction at the hands of surging equities–only time will tell.

This article was originally written by Jared Cummans, and posted on CommodityHQ.

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