Gold vs. silver? Now you can bet the spread

Precious metals have long been considered safe havens in turbulent times and there appears no sign of this ancient preference changing any time soon. Traditionally gold is the leader, with silver following at a considerable lag.

Whether you believe gold is overstretched or see silver as a pale substitute to the real thing, there is now an ETF that allows you to act on that opinion. Horizons BetaPro has rolled out a pair of funds that allow the investor to bet on the spread between gold and silver.

The new ETFs have rather self-explanatory names: Horizons BetaPro COMEX Long Gold/Short Silver ETF (HBZ) and Horizons BetaPro COMEX Long Silver/Short Gold ETF (HZB).

Over the last decade, the relationship between the two precious metals has tended to fluctuate between 40:1 and 80:1. While the two metals may both go up or down in price, investors can still potentially profit from trading the spread between the two metals if the price differential between them contracts or expands.

“The price spread between gold and silver is also a widely followed relationship and can be viewed as a third option to investing in gold and silver, beyond simply taking a long or short position in those two precious metals,” said Howard Atkinson, CEO of Horizons ETFs. “With a spread ETF you don’t necessarily need to get the market direction call of gold or silver correct. Instead, you want to look at whether one metal is going to outperform the other.”

Any U.S. dollar gains or losses as a result of the Gold/Silver Spread ETFs’ investments will be hedged back to the Canadian dollar to the best of their ability. Both ETFs will be rebalanced daily to ensure they will have equal exposure to its long index and short index to start each day.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.