Gold ETF vs Silver ETF
A gold ETF is an exchange-traded fund that invests in physical gold. One unit of a gold ETF represents 1 gram of physical gold of the highest purity, i.e. 24 Karat (24K). The Asset Management Company (AMC) responsible for the ETF stores 24K gold bullion equivalent to the number of ETF units in circulation in a secure vault.
On the other hand, a silver ETF is an exchange-traded fund that invests in silver bullion of the highest purity and fineness (0.999). Each unit of a silver ETF represents 1 gram of physical silver and is stored in a secure vault by the Asset Management Company.
Pros and Cons of Gold ETFs
Gold ETFs are often very liquid and considered to be a safe-haven investment. They may provide a hedge against inflation and adverse stock and currency market movements. Also, the Net Asset Value (NAV) of gold ETFs is usually stable, compared to other market-linked investment options.
However, on the negative side, the gold ETFs don’t offer any dividends or regular interest payments. Also, gold does carry the risk of price volatility.
Pros and Cons of Silver ETFs
Since silver is extensively used, its price is very responsive to changes in demand and economic conditions. Also, the per-gram price of silver is very affordable, which makes it very accessible to a wide range of investors.
However, the high volatility in its price can become a major disadvantage during adverse market conditions and its liquidity is comparatively lower than many other market-linked investment options.
Similarities Between Gold and Silver ETF Funds
- Both are traded on the exchanges.
- They track the price of the metals in their highest purity and fineness.
- They have low expense ratios.
- Both have maximum transparency in terms of holdings and the NAV.
Differences Between Gold ETFs vs. Silver ETFs
- While 0.999 purity gold bullion is the underlying asset of gold ETFs, the underlying of silver ETFs is 0.999 purity silver bullion.
- Industrial demand is one of the major factors that influence the price of silver ETFs. Gold, on the other hand, is not used in industrial processes.
- Silver ETFs are more prone to volatile price movements due to the industrial demand for the metal. The price of gold ETFs is relatively more stable.
- Since the per-gram price of silver is more affordable than the per-gram rate of gold, silver ETFs are far more accessible for investors.
- Gold has traditionally offered much higher returns as compared to silver
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.