Investing in Precious Metals with One ETF

October 26th at 8:23am by Tom Lydon

Investors can buy a basket of precious metals with one exchange traded fund rather than choosing individual metals such as gold, silver, platinum and palladium.

ETFS Physical Precious Metal Basket Shares (NYSEArca: GLTR) is up about 10% in 2011.

The ETF is designed for investors looking for one security that provides cost-effective precious metals exposure in a physically-backed fund, says ETF Securities, the sponsor. [A Quintet of Top Gold ETFs]

European debt worries and gold’s rally back above $1,700 have brought the focus back to precious metals after the September pullback.

Metals bulls say another financial massive bailout in Europe would lead to further monetary expansion and currency debasement.

The precious metal basket ETF owns a mix of gold, silver, platinum and palladium, in a fixed 25% position for each metal. Silver has been the best performer in the basket over the past month.

The ETF is backed by bullion — it doesn’t invest in futures. The fund has an expense ratio of 0.60% and holds $234 million in assets. [ETF Chart of the Day: Precious Metals Basket]

“Among commodities, precious metals have been widely adopted as inflationary hedges and ‘safe-haven’ assets because of their traditional store of value,” says Morningstar analyst Abraham Bailin in a profile of ETFS Physical Precious Metal Basket Shares. “Investors should be aware, however, that despite their ‘precious metals’ designations, price performance of silver, platinum, and palladium is driven to a large extent by industrial demand. On this basis, prices are likely to exhibit a high degree of sensitivity to economic ups and downs.”

He also notes that income or expenses on the ETF are taxed as “collectibles” at a maximum rate of 28%. Long-term gains on bullion-backed ETFs can be taxed at a higher rate than stocks.

ETFS Physical Precious Metal Basket Shares


Tisha Guerrero contributed to this article.

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.

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