Playing QE3 with ETFs

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Precious metals remained volatile as traders digested the Federal Reserve's latest move to reinvigorate the economy.

Gold has climbed 13% this year as sluggish economic growth lifts demands for “safe-haven” investments.  The metal jumped more than 2% on Friday following last month’s disappointing jobs report, and is higher again Thursday on the heels of the Fed’s decision to enact so-called QE3.

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Hints of QE3, paired with the European Central Bank’s decision to launch a new bond-buying program, had boosted precious metal prices to multi-month highs.

Investors in gold and silver exchange-traded funds get a big boost from QE3, as the metals move inversely to the price of the U.S. dollar.

The SPDR Gold Trust ETF (NYSE:GLD), which mirrors the current price and trends in physical gold, is sitting near a multi-month high. Investors have poured more than $1.82 billion into the fund over the past four weeks, according to Index Universe. GLD is up nearly 7% in the past month and more than 10% this year.

The iShares Silver Trust (NYSE:SLV) backs physical silver and is up more than 18% in the last four weeks as silver prices have soared. Traders are taking notice, pouring $55.41 million into the exchange-traded fund since August 12.

Of course, if you think the rally has run its course, there are ways to play that, too. The UltraShort Gold ProShares ETF (NYSE:GLL) tracks two times the inverse performance of physical gold, the exact opposite of GLD. The exchange-traded fund is constructed to rise as the index falls while seeking to deliver twice the daily return. With the recent surge in gold, GLL is down nearly 25% since January 1.

The ProShares UltraShort Silver ETF (NYSE:ZSL) is a direct bet against the SLV, seeking investment results corresponding to twice the opposite of the performance of silver bullion. The risky ZSL is down more than 30% in the past month while attracting $17.79 million in inflows since August 12.