The European Central Bank and the Bank of Japan are fighting hard against deflation and this will eventually have an impact on the global economy. Furthermore, underemployment in the United States has been a problem. As consumers earn less money, they logically spend less. This, in turn, leads to decreased prices for goods and services in order to maintain demand. This is deflation and it’s happening right now…very slowly. To add to the problem domestically, companies are laying off workers due to healthcare reform so they can maintain profits. In addition, the decline in oil will lead to layoffs in that industry as well. (For more, see: What Does Deflation Mean to Investors? )

While deflation is the threat at the moment, inflation will return one day. This is most likely to take place when organic growth (not debt-fueled growth) returns. When this takes place, inflation should be rampant due to recent Federal Reserve policies. It’s even possible, if not likely, that we will see new highs for gold and silver. But this isn’t likely to happen in the next one to three years. Deflationary cycles take years to play out.

Whether you’re seeking diversification or waiting for gold and silver prices to bottom so you can get in at the right price, here are four precious metal exchange-traded funds (ETFs) to consider. (For more, see: A Beginners Guide to Precious Metals .)

SPDR Gold Shares (GLD )

GLD is the most popular gold ETF. Since its inception on November 18, 2004, it has appreciated 159.66%. However, before getting excited about that performance there are a few of things you should know.

GLD did not perform well during the financial crisis. For example, in February 2008, it traded as high as $96.18. In September 2008, it traded as low as $71.34. This is one example of how gold isn’t always a good hedge against difficult economic times. The reason for the poor performance was a deflationary (not inflationary) environment. Once the Federal Reserve stepped in to prevent deflation, precious metals soared. If we’re faced with another deflationary scenario, would the Federal Reserve step up to the plate again? It’s possible, but it wouldn’t provide a long-term solution. (For more, see: When the Federal Reserve Intervenes and Why .)

GLD has depreciated 29.94% over the past three years. That’s because the gold trade is now backward looking. Savvy investors are forward looking and ride the trend until there are cracks. This precious metal cycle has cracks.

Finally, GLD comes with a 0.40% expense ratio. This is lower than the average ETF expense ratio of 0.46%, but it still has the potential to eat into your profits.

iShares Gold Trust (IAU )

What immediately makes IAU more appealing than GLD is an expense ratio of 0.25%. If you look at three-year performance for both GLD and IAU (neither good), you will see almost exactly the same results. But if you stretch that out to all-time performance, IAU has appreciated 179.61% slightly better than GLD. Both GLD and IAU are actively traded, which keeps their bid/ask spreads tight. (For more, see: The Basics of the Bid-Ask Spread .)

iShares Silver Trust (SLV )

SLV launched on April 21, 2006. Since that time, it has appreciated 16.66%. That’s clearly not as impressive as the performance of the gold ETFs above, but it should be noted that silver’s spikes are higher during precious metal bull markets. On the other hand, silver’s declines are steeper during precious metal bear markets. SLV has an expense ratio of 0.50%, which is a little on the high side.

ETFS Silver Trust (SIVR )

SIVR has appreciated 18.89% since its inception on July 24, 2009. After an initial tear, it has been sliding since April 2011. The expense ratio of 0.45% is better than SLV. But in this case, you will probably be better off going with SLV due to SIVR’s low daily average volume of 125,456. This leads to wider bid/ask spreads, which can sneakily cost you money.

The Bottom Line

This isn’t likely to be the best time to buy gold or silver. If you choose to go long on gold or silver in order to combat inflation, whether now or in the future, the ETFs outlined above are worth considering. (For more, see: The Better Inflation Hedge: Gold or Treasuries ?)

Dan Moskowitz does not have any positions in GLD, IAU, SLV, or SIVR.