As gold and silver prices continue to rise, precious metals related exchange traded funds (ETFs) are becoming the go-to investment many trying to capitalize on their surging prices and safe-haven attributes.
The price of gold touched on a record before settling at a price just below that, while silver is perched at its highest price since March 2008. But it’s not just safe-haven demand that’s pushing the metals skyward.
- International Buying. The International Monetary Fund (IMF) sold 10 metric tons of gold, worth $403 million, to Bangladesh with hardly a market reaction, according to GoldAlert. Individual retail and institutional investors, like Bangladesh, are seeking out gold-related investments as world currencies depreciated against the precious metal.
- Sheer Momentum. Gold, which is hovering at its $1,265 record high, is expected to gain for the 10th consecutive year on years of loose monetary policies that have flooded the markets with cash. [Gold ETF Soars to Record Highs.]
- Industry. Talks of continued quantitative easing from the Feds and the ongoing eurozone financial debacle have helped gold and silver funds, remarks John Spence for MarketWatch. Additionally, some analysts have noted that industrial demand has also supported the silver market. Silver is considered a leveraged play on gold.
- Jewelry. It’s festival season in India, the world’s largest gold consumer. This period in the country drives demand for gold jewelry. Look out, though: higher gold prices this year could scare some buyers off.
- ETFs. Some observers also believe that with the greater interest in gold and silver markets, as a direct result of ETFs, any turn in the market could result in a dramatic exit of the precious metals market.
Gold- and silver-backed ETFs hold the physical commodity, and for each share an investor owns, one “owns” a tenth of an ounce of gold or one ounce of silver, writes Alix Steel for TheStreet. Physically-backed ETFs are also treated like collectibles, which are taxed at around 28%. [Gold ETFs: Economic Teflon?]
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- SPDR Gold Shares (NYSEArca: GLD). GLD is the second-largest ETF in existence, with $52.2 billion in assets, holding 41.6 million ounces of gold.
- iShares Comex Gold Trust (NYSEArca: IAU). IAU is the cheapest gold ETF, with $3.9 billion in assets, holding 3.1 million ounces of gold. The fund’s expense ratio is 0.25%.
- ETFS Physical Gold Shares (NYSEArca: SGOL). SGOL is the newest gold ETF, with $700 million in assets, holding 652,125 ounces. The fund has an expense ratio of 0.39%.
- iShares Silver Trust (NYSEArca: SLV). SLV has $5.9 billion in assets, holding 298 million ounces of silver. The fund has an expense ratio of 0.50%.
- ETFS Physical Silver Shares (NYSEArca: SIVR). SIVR has $191 million in assets, holding 9.5 million ounces of silver. The fund has an expense ratio of 0.30%.
Max Chen 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.