Gold ETF and silver ETF products have been on a roll lately as the Federal Reserve has implemented QE3. Also, the European Central Bank has launched a nearly unlimited bond-buying program to prop up members of the EU, and economic power house China has cut interest rates and may go further to stimulate their economy. More financial liquidity helps precious metals like gold and silver to appreciate due to their scarcity and the likely depreciation in the values of currencies (primarily the U.S. Dollar) they are priced in. So what which is the better investment, a gold ETF or a silver ETF?

Let's take a look at the two largest gold and silver ETFs that focus on physical holdings of the two metals: the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV). Here's the one month performance chart from Google Finance.

gold-vs-sliver-one-month

The silver ETF has crushed the gold ETF in the last month. As you can see, SLV has vastly outperformed GLD over the last month -- in fact by about 300 percent. So is silver the best way to play a potential QE3? The answer depends on what type of volatility an investor is comfortable with.

Let's examine a year-to-date comparison between GLD and SLV. Both of these ETFs have seen good and bad days in 2012 and this perspective is important to add to the consideration because it shows longer-term trends.

GLD-Vs-SLV

A longer term view of gold and silver ETF performance yields better perspective. From the chart we see that SLV actually more than doubled GLD's performance at its peak in late February. That's the good news for silver investors. The bad news is that it fell considerably more than GLD. In fact SLV swung from a gain of about 24 percent to a loss of 11 percent -- a 35 percentage point swing. Meanwhile GLD's move was more moderate, going from a gain of about 11% to a loss of 4 percent -- or a 15 percentage point swing. Silver definitely has shown more sensitivity to QE3 hopes and fears this year. Is it any wonder then that the anticipation for QE3 shot the silver ETF three times higher than the gold ETF?

Gold ETF, The Muted Option?
The silver ETF appears to offer more sensitivity based on current and year-to-date performance. The gold ETF appears to offer a more muted approach relative to silver. Investors with a higher risk tolerance were better served allocating to silver when speculating on QE3 taking place. Likewise, investors with a more moderate risk tolerance should have considered gold as the more appropriate play. Either way both ETFs moved in the same direction based off QE3 activity and will likely to do so in the immediate future.

Christian Magoon is the publisher of ETF Web sites GoldETFs.biz and IndiaETFs.com.