The SPDR Gold Trust (GLD 1.49%) offers a simple premise: get direct exposure to the price of gold. If gold goes up by 1%, this fund also goes up by 1%. It doesn't contain any gold mining companies that can introduce unpredictable returns relative to gold prices.
This fund has been an excellent performer as more people accumulate gold as an inflation hedge that also offers some protection from economic uncertainty. This ETF is up by more than 70% over the past year and has almost tripled over the past five years. However, the iShares Silver Trust (SLV 1.17%) looks like the better pick, especially after a sharp correction.
Silver has more use cases than gold
Image source: Getty Images.
Gold gets most of its value from being a store of value for financial purposes, and while it has some industrial applications, silver simply blows it away in that regard. Silver's unique properties make it the most electrically and thermally conductive metal, making it the metal of choice for artificial intelligence (AI) infrastructure, electronics, medical devices, the 5G buildout, and other industrial applications.
NYSEMKT: SLV
Key Data Points
Many of these industries are gaining momentum, which will boost demand for silver. Grandview Research anticipates the artificial intelligence market having a 30.6% CAGR from now until 2033, and the 5G market is projected to maintain a 13.1% CAGR during that same time frame. Fortune Business Insights believes the medical devices industry will have a 6.9% CAGR from now until 2034.
As each of these industries grows, silver is poised for price rallies that will be reflected in the iShares Silver Trust. This fund offers direct exposure to silver rather than mining companies that dig it up.
Silver has the same protections as gold
Although gold has a stronger reputation as a store of value, silver serves the same purpose. You can hold silver as a unit of value that acts as an inflation hedge. The precious metal is also bound to gain value during periods of economic uncertainty.
Silver has less correlation to the stock market than the average asset, but there is still some correlation since it has many industrial applications. That's one of its key distinctions from gold, but the broad protections remain the same.
At this time, the industrial applications of silver are serving as major tailwinds. Companies need silver to create various products and services, and it is critical for the AI buildout. There are smaller, lesser-known metals, like antimony and palladium, that are also valuable for the AI buildout. Silver is less risky than those options while offering a higher potential upside than gold during a bullish economic cycle.
