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Gold ETFs vs Silver ETFs - Best Investments for 2019? - YouTube
Channel: Learn to Invest - Investors Grow
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hey YouTube I'm Jimmy in this video I'm
going to go through the advantages and
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disadvantages of investing in gold and
silver the best way to invest in them
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and which is better gold or silver from
an investment standpoint so in a recent
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video I published a question came up
about investing in gold and silver ETFs
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and although I know a decent amount
about gold as a hedge and a pretty good
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understanding of how gold as a commodity
is traded I realized that I don't know a
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ton about gold or silver ETFs and
probably not as much as I could about
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gold or silver itself but as luck would
have it I happen to know one of the
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world's leading experts on gold his name
is Will Rhind and I've known him for a few
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years and I know him because he started
a company called Granite Shares
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they manage a few ETFs the reason I
thought of him when I was prepping for
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this video is that one of those ETFs is
called the granite shares gold trust
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ticker symbol ba R now his ETF is very
similar to a spider ETF which is called
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the spider gold ETF ticker symbol there
is GLD GLD is the largest gold ETF in
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the world with about 30 billion in
assets so what's interesting about Will
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and one of the reasons that I turn to
him when I have questions about the
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commodity markets specifically gold was
that we'll spent two years as the CEO of
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GLD so clearly he's one of the best at
this okay so now let's kick it off with
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the first question if we want to invest
in gold or silver what's the best way to
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do it is it in fact ETFs why don't we
just buy the commodity itself well let's
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say we would go ahead and we were to buy
the commodity let's say we're to buy
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gold a gold coin or bullion or gold bar
whatever it might be well the first
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thing we're gonna have to do is we're
gonna have to store that how're we going
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to store it safely do we put it in safe
maybe a safe deposit box we stick it on
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drawer mattress either way there's going
to be a cost involved in storing it or
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at least throwing it smartly but the
biggest reason that we don't want to buy
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gold itself is the pricing you would get
so when you go ahead and buy gold and
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let's say you buy gold gold coin from
where you buy some reputable store
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online well they're not gonna sell to
you at the current spot price of a
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$1,250 per ounce they're gonna mark it
up so that they can make their money and
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now let's say you want to sell it back
to them well when you sell it back to
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them the same issue they're gonna mark
it down they're gonna pay less than the
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current spot price so you get hit twice
when you buy and sell it so if we're
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gonna buy a gold ETF what do we get and
what's the risk and the same will hold
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true for silver but I'm just going to
focus on gold for now so the two to ETFs
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that I narrowed it down to was BAR and
GLD and functionally the two of them act
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very similar to each other when you buy
a share either those gold ETFs you're
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buying one tenth of an ounce
so 10 shares is the same as buying one
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ounce of gold
now when the ETF gets money when you
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invest money in the ETF the ETF takes
that money and they go ahead and they
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actually buy the gold and they store it
in vaults in London they serve them in
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different folks but either way the
concept is the same you buy btf they
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take that money they buy actual gold so
in theory that ETF is completely
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backed by gold this means that the price
of these two ETFs should closely track
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the price of gold
actually it should closely track one
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tenth of the price of gold the only real
difference between gold and the ETF is
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the fees and this brings me to why I
like BAR over GLD. BAR charges 17
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and 1/2 basis points and GLD charges 40
basis points to me it's as simple as
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that they both do the very same thing
why pay more now just to be clear yes I
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know Will and I like him and he's helped
me further understand the markets but
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I'm not getting paid from him to say
anything like this it's as simple as
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they do the same thing as GLD but they
charge less to me that's a huge
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advantage so if we switch the silver
well one thing I noticed that there's
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not nearly as much money in silver ETF
as a raising gold ETF the largest silver
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ETF I could find was the iShares silver
trust they've got about four and a half
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billion dollars and they charge a fee of
about 50 basis points so 1/2 of 1% then
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there's also the aberdeen standard
physical silver ETF their ticker symbols
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SIVR once again they do the same
thing as SLV
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except that they only charge 30 basis
points so to my way of thinking SIVR
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seems to make more sense and I don't
know anybody at that ETF so I'm gonna
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have to branch out my network a little
bit and see if I can expand that for a
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future video ok now this brings us to
the next question which is better gold
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or silver so people often link gold and
silver together and they talk about them
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as if they're interchangeable
investments and interestingly they're
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really not
broadly speaking gold isn't they very
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usable commodity sure it's used in
jewelry and some electronics but
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historically gold has been mostly it's
mostly been a way to store people's
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wealth silver on the other hand has many
more industrial uses than gold has and
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ultimately what this means for us is
that silver is much more tied to the
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business cycle than gold would be this
should also make silver more volatile
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and when I went ahead and checked the
one year standard deviation for both SIVR
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and BAR SIVR came in at about 10
and BAR came in about 7.3 so it seems
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that gold is less volatile than silver
at least it has been over the past year
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so this leads us to the question are
gold and silver ETF is a good investment
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right now well based on what I've seen
from a silver perspective I would feel
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much more comfortable investing in SIVR if we were closer to the bottom of the
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business cycle since they are in fact
more closely tied to the economy so if a
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recession does hit and the market does
keep going down well silver may not
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perform as well since the industrial
demand for silver would likely slow this
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chart right here this is a chart of
silver compared to the S&P 500 and since
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the start of 2018 the S&P is down about
3% and SIVR is down about 14% when we
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switch to gold well we can once again
see that the S&P is down about three and
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BAR is down about 4% now it looks like
silver is in fact less resilient than
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gold so this supports our thesis that
the potentially slowing economy could
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spook silver investors more than gold
investors but there is something
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interesting about this chart and that is
that gold has been down since about
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March sure when the market got a bit
more
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in this area well gold started moving
higher but why the reversal of gold
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prices back in the march/april area and
our answer lies in this chart this is a
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chart of DXY. DXY is the US dollar
index
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basically it's a US dollar versus all
the world major all the world's major
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currencies so it's a clean way of
looking at the price of dollar first as
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much of the rest of the world and we
could see that when we look at how gold
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did against the US dollar we can see
that they move rather opposite of each
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other they move inversely so when the
dollar Falls gold will rise and I think
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that this is crazy important because
perhaps gold isn't the hedge it's believed
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to be well it is but not for the reasons
that many people thought it was at least
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the way I was thinking it was before I
went ahead and did the research for this
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video and that's because in a recession
often times the value of the dollar
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weakens so we know that if the dollar
weakens well gold will move higher so
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ultimately it's likely the value of the
dollar that's driving gold higher and
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not the recession or not the S&P 500 so to
test this I actually put together this
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chart this is a chart of gold versus the
US dollar during the Great Recession and
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as we could see when the dollar fell
early onlet on gold jumped higher then
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when the dollar started to rally while
gold began to fall then towards the end
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of the recession the dollar fell off
again and once again gold began to move
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higher so now we know what we're dealing
with as far as gold is concerned we know
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that the silver that the price of silver
is often tied to the business cycle that
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being said do we think that silver and
gold are good investments right now now
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personally I'm not a huge fan of silver
at this point because like I mentioned
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before I actually think that we're
closer to the end the to the top of the
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business cycle than we are the bottom
and I'd rather wait for the bottom we're
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gonna jump in silver so we already saw
that the gold is tied to the US dollar
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and we know that the dollar rising helps
create this dip in the price of gold but
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what made the dollar rise well the
dollar is tied to many different things
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but one of the main drivers of the
dollar is interest rates and if you pay
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attention to the markets at all in
recent years then you've likely heard
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that interest rates have been rising
rising rates
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tend to drive the dollar higher and we
know that if we drive the dollar higher
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we're gonna drive gold lower that
explains why the S&P is down and so is
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gold and this brings us full circle as
to why gold does work as a hedge see in
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recession the Federal Reserve is
unlikely to keep rising rates in fact
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they're more likely to lower rates often
leading to a falling dollar which we
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know will lead to rising gold prices so
should we buy gold for 2019 and for me I
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think it makes a lot of sense to have
this type of hedge in place and any
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pullback in the economy or uptick and
inflation will almost certainly stop the
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Fed from raising rates any further this
should help gold and ultimately our
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portfolios so if you've been following
our channel at all well you may have
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seen that we're doing a series called
the Dow of 30 where we're analyzing all
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30 stocks in the Dow Jones Industrial
Average and then what we're going to do
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is we're going to take that analysis
we're gonna build three different
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portfolios a value of growth in a
dividend portfolio well with that in
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mind it might make sense to consider
adding gold as a hedge as one of our
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positions to see if it could help hedge
our portfolios when we go ahead and
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build those now for me
I would add BAR over GLD simply for the
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fact that the fees are lower I think
watching fees is crucially important and
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we're getting the same thing we're
getting one tenth of an ounce for every
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share that we buy but what do you think
should we add BAR to our portfolios is
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gold the smartest investment for 2019
it could be let me know what you think
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in the comments below and if you haven't
done so already hit the subscribe button
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thank you for sticking with me all the
way to the end of the video and I'll see
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in the next video thanks
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