The interest in precious metals of all types as an investment tool is growing, and exchange traded funds (ETFs) that track these particular metals make exposure and diversification easier for the average investor.
There are many reasons to buy into a precious metals investment, and ETFs can give the desired exposure to gold, silver and platinum.
Gold. Gold is the godfather of all the precious metals for various reasons, according to Aryeh Katz for Investopedia:
- Gold is a safe haven and is recognized by almost all governments as being a safe store of value
- Inflationary pressures can be hedged with gold (read more on fighting inflation with ETFs here)
- War and political upheaval have always sent people into gold-hoarding mode; an entire lifetime’s worth of savings can be made portable and stored until it’s needed
Moming Zhou for MarketWatch reports that Jim Rogers recently claimed gold will hit $2,000 per troy ounce within the decade. As long as the U.S. dollar continues to weaken, gold prices could continue to rise because gold priced in dollars will become cheaper for overseas buyers (Read 7 more things you should know about gold here).
- SPDR Gold Trust (NYSEArca: GLD)
- iShares COMEX Gold Trust (NYSEArca: IAU)
- PowerShares DB Gold (NYSEArca: DGL)
- ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
- Market Vectors Gold Miners (NYSEArca: GDX)
- E-TRACS UBS Bloomberg CMCI Gold ETN (NYSEArca: UBG)
Silver. Silver – the “poor man’s gold” – is also a good way to hedge against inflation, and it benefits from its appeal as both an industrial and precious metal. This means that it can be treated as a safe haven investment, as well as an investment for investors looking to benefit from an uptick in industrial demand. A note of caution: since silver’s market is smaller than gold’s, it can be more volatile. Silver’s main investment approach is determined by factors such as:
- Silver’s role in photography and film has kept demand high; however, the advent of digital cameras has dented the need for silver
- Middle class population growth in emerging markets is great, and this demand for industrial and electrical supplies puts much more pressure on the silver store
- Silver’s use in batteries, superconductor applications and microcircuit markets is a major source of demand
- ETFS Physical Silver Shares (NYSEArca:SIVR)
- iShares Silver Trust (NYSEArca: SLV)
- PowerShares DB Silver (NYSEArca: DBS)
- E-TRACS UBS Bloomberg CMCI Silver (NYSEArca: USV)
Platinum. Platinum tends to fetch a higher price than gold during routine periods of market and political stability simply because it’s much rarer. Other factors affecting platinums price include:
- The greatest demand for platinum comes from automotive catalysts, which are used to reduce emissions; after this, jewelry accounts for the majority of demand
- Auto sales and production numbers are also determinants of platinum’s price
- Platinum mines are heavily concentrated in two countries: South Africa and Russia; This places much more pressure on the platinum market.
Jeff Nielson for DNA reports that the direction of the precious metals markets are not easy to determine in the short term. The longer the time horizon (and the larger the data stream), the more predictable are the movements of companies, commodities, and overall markets.
Various ETFs that give exposure to precious metals:
- E-TRACS UBS Long Platinum ETN (NYSEArca: PTM)
- iPath Dow Jones AIG Platinum TRSub Index (NYSEArca: PGM)
In addition to specific exposure to metals ETFs, investors can also find broad metal ETFs that hold either the metals themselves, futures contracts or the stock of companies involved in the production of these metals:
- PowerShares Global Gold & Precious Metals (NYSEArca: PSAU)
- SPDR S&P Metals & Mining (NYSEArca: XME)
- Emerging Global Shares DJ Emerging Markets Metals & Mining Titans (NYSEArca: EMT)
- PowerShares DB Precious Metals (NYSEArca: DBP)
- iPath Dow Jones AIG Precious Metals TR Sub Index (NYSEArca: JJP)
For more stories about precious metals, visit our precious metals category.
For full disclosure, Tom Lydon’s clients own shares of GLD and SLV.
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.