Precious Metal ETFs Regain Shine: Will It Last?
After giving appalling performances, precious metals regained their sheen in the past couple of weeks as volatility levels picked up. This is especially true in the backdrop of growing fears over the global economy and China instability. While the U.S. economy is improving, the devaluation of the China currency and its negative impact has gripped the global market, raising fears over the global slowdown. This coupled with sluggish growth in emerging markets has compelled investors to turn their focus on precious metals as a store of wealth and a hedge against market turmoil. In particular, the global risk-off trade situation has resulted in a flight to safety to gold. Additionally, the Fed minutes dented the chance of an interest rate hike next month, leading to a decline in the U.S. dollar and a rise in gold price. Further, the growing U.S. economy is supporting the strength in silver price as the bullion is used in a wide range of industrial applications. About 50% of the metal’s total demand comes from industrial applications while 30% comes from jewelry/silverware/coins and medal manufacturers. Coming to platinum and palladium, the automotive industry, mainly catalytic converters for vehicles, is a big driver of demand. The industry is experiencing huge growth given increasing consumer confidence, rising income and of course cheap fuel. The bullish trend in the precious metals is likely to continue at least in the near term especially given the China-led global worries and the slumping stock market. Below, we have highlighted four winners from this corner of the commodity world over the past 10 trading sessions. Each of these has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook: ETFS Physical Platinum Shares ETF (NYSEARCA: PPLT ) This fund tracks the performance of the price of bullion platinum, before Trust expenses. With about $497 million in AUM, this is the largest and the only physically backed platinum product and kept in Zurich or London in plate and ingot form under the custody of JPMorgan Chase Bank. The product trades in light volume of around 32,000 shares a day and charges 60 bps in fees per year from investors. The ETF surged about 8.3% in the past 10 days. SPDR Gold Trust ETF (NYSEARCA: GLD ) This is the ultra-popular gold ETF with AUM of $24.3 billion and average daily volume of more than 5.6 million shares a day. This fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio came in at 0.40%. The fund gained 5.8% in the same time period. ETFS Physical Silver Trust ETF (NYSEARCA: SIVR ) This fund has amassed $281 million in its asset base while trades in moderate volume of more than 76,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses and is backed by physical silver under the custody of HSBC Bank USA in London. Expense ratio came in at 0.30%. SIVR was up 5.7%. ETFS Physical Precious Metals Basket Trust ETF (NYSEARCA: GLTR ) For investors seeking the broad precious metal play, GLTR could be the most intriguing option. This fund provides exposure to all four precious metals in the physically backed form. Gold takes the top spot at 58%, followed by 29% in silver while the rest is almost evenly split between platinum and palladium. The product is kept in London or Zurich under the custody of JPMorgan Chase Bank. It has amassed $140 million in its asset base while trades in small volume of about 21,000 shares per day. It charges 60 bps in annual fees from investors and added 5.7% in the same time period. Bottom Line Precious metals create wealth and have been the most exciting investment area especially during times of economic and political turbulence. This is because these have value recognition nearly everywhere in the world and could easily be converted into liquid cash in any currency. The buying pressure has been intense for the precious metals lately and the most recent global economic woes have been extremely favorable for their performances. Additional buying could be in the cards for the space should tensions in China escalate. Link to the original article on Zacks