The performance of the major, physically-backed precious metals exchange traded funds has been mostly impressive this year.
Although the iShares Silver Trust (NYSEArca: SLV) has traded lower, the SPDR Gold Shares (NYSEArca: GLD) and rival physical gold ETFs have gained over 6%. Gold ETFs are also recouping some of the billions in assets lost last year. Globally, investors pulled $946 million from gold ETFs in January, but they returned to ETFs like GLD and the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) in February and March, allocating a combined $858 million to gold funds in those two months. [Gold ETFs Could Surprise With Epic Rally]
The real strength among metals ETFs has come by way of the ETFS Physical Palladium Shares (NYSEArca: PALL), which entered Thursday’s session with a year-to-date gain of 10%. That may be just a starting point for the metal, which is a key component in the production of automobiles manufactured in China and the U.S., the world’s two largest auto markets. [Palladium ETF Reaches 3-Year High]
“South African strikes and fears of trade sanctions against Russia have recently buoyed platinum and palladium prices, exacerbating what are already expected to be large deficits in 2014. Platinum has rallied about 5% in 2014, with palladium up 11% over the same period,” according to a new research note from ETF Securities.
The ETFS Physical Platinum Shares (NYSEArca: PPLT) is up about 2% this year although more than 600,000 ounces of platinum production has been lost due to labor strife and trade sanctions. Elevated above ground stockpiles have likely limited gains for palladium and platinum, according to ETF Securities.
“While we remain positive platinum and palladium price fundamentals in the long run, we believe elevated stockpiles have limited recent price rises. Although both markets have become a lot tighter over the past months, we believe the catalyst for a sharp rally would be for one of the top 3 producers (Amplats, Implats and Lonmin) to fail to meet all contractual obligations or to actively purchase metals in the open market to supply its contracts. Nonetheless, PGM prices could be subject to a correction if the heightened risks in the Crimean region and prolonged strikes in South Africa fade or disappear,” notes ETF Securities.
ETFS Physical Palladium Shares
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and SLV.