Should Silver Be A Part of An Inflation Hedge? (GDX, GLD, SLV, SIVR)

With Gold (NYSE: GLD) and gold miners, best measured by the Market Vectors Gold Miners ETF (NYSE: GDX) approaching recent highs one wonders if there is another way to play the inflation hedge. Silver, although much less publicized, has also been a good hedge against inflation and a weakening US dollar over the past 2 years.

An investor can invest in silver in several ways. It is possible to purchase silver miners, although since there is no silver miner ETF in existence to my knowledge one would need at least $5-10k devoted to silver alone to purchase a basket of these individual stocks. A more cost efficient way would be to purchase Ishares Silver Trust (NYSE: SLV) or ETFS Silver Trust (NYSE: SIVR). Both of these ETFs actually do hold physical silver bullion.

Over the past 2 years Silver, like Gold, has proved to be a good diversifier and hedge against the value of the US dollar. The S&P 500 over the past 2 years is down 30%, GLD is up 40%, while SLV is up 32%, while GDX (correlated with both the metal gold and general equities) is up 10%.

It seems Silver could be a worthwhile investment within ones precious metal allocation. Although with the metal up 25% over the past month investors might be wise to wait for a pull back.