5 Reasons Precious Metals ETFs May Stay Solid | ETF Trends

Growing on safe-haven demand, precious metals exchange traded funds (ETFs) have been attracting more investors as Europe’s debt problems keep piling on. But Europe is far from the only impetus.

  • Matt Zeman, a metals trader at LaSalle Futures Group in Chicago, believes that “Europe’s debt problems will keep a floor under gold prices.”
  • Gold prices have also been gaining as governments maintain low rates to aid their economies, reports Pham-Duy Nguyen for BusinessWeek.
  • An influx of cash that has gone toward supporting flagging economies could eventually lead to inflation, and investors are positioning themselves early with precious metals.
  • Investment demand, whether it’s just because, the need for a safe-haven or diversification, is strong and getting stronger.
  • According to Jordan Roy-Byrne, proprietor of Trendsmen, for Minyanville, precious metals perform when they are outperforming most other markets. If stocks and/or commodities do poorly, there will be greater demand for precious metals. That’s not to say that precious metals won’t perform if stocks and/or commodities also perform. It’s just that precious metals won’t be skyrocketing the way they are now if other assets do well, too. [Silver ETFs Gain After China’s Moves.]

Since “conventional” commodity options are doing well, Jordan argues that precious metals could be consolidating or correcting. Gold, though, has not reached the technically overbought condition, so it is not as vulnerable now. Silver, on the other hand, is overbought and may need to consolidate in the next several months, says Jordan. [Weak Dollar Gives Gold ETFs a Kick.]

Still, since Western countries continue to monetize debt by printing money or quantitative easing, the precious metals market will likely experience a bullish trend.

It’s human nature: if you’re not in precious metals, you feel as though you’re missing out. If you’re in precious metals now, you’re wondering if it’s time to sell. What should you do? Read this, then proceed accordingly.

For more information on precious metals, visit our precious metals category.

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.