Two Reasons Metals ETFs Are On a Joyride

January 11th at 11:00am by Tom Lydon

gold_gold_bars_238161_tn The U.S. dollar is continuing on the path toward weakness today and the latest numbers from China show that its appetite for raw materials has only grown. Both factors are contributing to gains in commodity-focused exchange traded funds (ETFs). Is it sustainable?

A weaker U.S. dollar and overall commodity strength has given gold another rally, sending it up to $1,159.50 an ounce on the Comex division of the New York Mercantile Exchange. Allen Sykora for The Wall Street Journal notes that a softer greenback makes all dollar-denominated commodities cheaper in other currencies and thus can help demand. Gold also benefits from its position as a weak-dollar hedge.

Analysts said risk appetite for commodities as an asset class also was helped by data showing that China’s imports rose 56% last month. China was most voracious for oil and iron ore, and analysts believe that overseas demand should remain robust for the time being. [Why gold prices are through the roof.]

Meanwhile, a U.S. ETF launch of a platinum- and palladium-focused fund have given investors their first opportunity to own the metal through this type of investment. [Read about the launch here.] There’s big demand for such products: the other major operator of precious metals ETFs in Europe, Zurich Cantonal Bank, said its platinum-backed product also more than doubled in size last year, reports Jan Harvey on Reuters.

There are a variety of ways to play metals with ETFs: with physically-backed funds, funds that own futures and funds that own metals and mining companies. To get the exposure you’re looking for, take a peek under the hood to be sure you’re getting the ETF you want.

For more stories about platinum or gold, visit our precious metals category.

  • SPDR Gold Shares (NYSEArca: GLD)
  • SPDR S&P Metals & Mining (NYSEArca: XME)
  • Market Vectors Gold Miners (NYSEArca: GDX)
  • iShares COMEX Gold Trust (NYSEArca: IAU)
  • PowerShares DB Gold Fund (NYSEArca: DGL)
  • ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
  • ETFS Physical Platinum (NYSEArca: PPLT)
  • ETFS Physical Palladium (NYSEArca: PALL)
  • iPath DJ AIG Copper TR Sub-Index (NYSEArca: JJC)

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.