Trading in precious metals like gold and silver has been quite
poor as of late. These two key commodities have been beaten down
significantly in 2013, underperforming broad stock markets by a
pretty wide margin.
In fact, gold, represented by
, is down about 20% YTD, while silver, as represented by
, has plunged by nearly 30% in the same time frame. And given
that many of the reasons for this slump are still impacting the
market-such as a strong dollar and a huge demand for equities-one
might expect some more short term weakness in this corner of the
investing world (read
4 Ways to Short Gold with ETFs
Equities any better?
Trading in miners of these precious metals haven't been any
more favorable, and if anything they have been worse, as these
have underperformed their bullion cousins year-to-date. This is
because these miners trade as a leveraged play on their
underlying metal, so in bull markets they tend to outperform
while bear markets usually lead to steep losses, like what we
have seen as of late.
The most popular gold mining ETF,
, has lost a whopping 40% in the year to date time frame, while
the most popular silver mining ETF,
, is down about 43%, suggesting pretty catastrophic losses across
the space. Given this, investors might feel like they have few
options in the gold and silver market that can hold up well,
although a recent series of launches may be changing that.
Covered Call ETNs: A better way to play?
Recently, Credit Suisse launched two ETNs that seek to give
investors a new way to play the precious metals market. These
employ a covered call strategy which looks to provide investors
with a great deal of income while still offering some exposure to
These products currently trade under the symbol of
for gold exposure and
for silver access. While both haven't exactly performed well from
a performance standpoint in their short histories, they do pay
out solid levels of monthly income (
Gold ETFs and Covered Calls in Brand New GLDI
In fact, GLDI has a 12 month yield of about 6.9% while SLVO is
currently sporting a low double digit yield. Obviously, with
payouts like this, any capital losses are dulled, suggesting that
these could be lower risk plays on metals, at least in the
current bear-to-neutral market.
However, it is worth noting that both of these products do
have paltry volumes which could result in higher bid ask spreads
and increase trading costs. This makes these notes a bit on the
pricey side as their expense ratios already come in at an
elevated level of 0.65% (read
Combine Silver ETFs and Covered Calls with
Still, in flat or down markets, a covered call strategy can be
a very interesting play, and one that can outperform 'regular'
gold and silver ETF investments. So if you are still uncertain
about the precious metal world in the near term, consider taking
a look at SLVO or GLDI for a way to tackle precious metal ETF
investing with a potentially higher level of income, and a lower
amount of risk.
For more on recent trading in the precious metal market, and
the covered call ETNs that may be able to offer better exposure,
watch our short video on the topic below:
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MKT VEC-GOLD MI (GDX): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
GOLD-SH CVD CAL (GLDI): ETF Research Reports
GLBL-X SILVER (SIL): ETF Research Reports
ISHARS-SLVR TR (SLV): ETF Research Reports
CS-SLV SHR CC (SLVO): ETF Research Reports
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