With June nearly in the books, it is fair to say gold and silver exchange traded funds pleasantly surprised investors this month.
The SPDR Gold Shares (NYSEArca: GLD) looks poised to close the month with a gain of 6% while the iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) are sitting on June gains of about 11.5%. Gold could still be an attractive hedge with equities in some parts of the developed world looking richly valued.
“While much of the attention lately in the precious metals market has turned to geopolitical events in Iraq and Russia, since the end of February the real yield on the US 7-year note has declined a full percent to zero-despite fed tapering,” said ETF Securities in a new research note.
Investors pulled $50.3 million from SLV last week, but more than $101 million flowed into GLD after assets in physical gold ETFs dipped to the lowest levels since 2009. [Asia Holds Keys for Gold ETFs]
“Since the end of February, the price of gold is effectively flat but is holding above US $1,300 oz. after recovering from a fall down towards the US $1,200/oz level following the announcement of aggressive new monetary easing measures by the European Central Bank (ECB),” said ETF Securities.
Silver is not to be overlooked. Over the past year, only the ETFS Physical Palladium Shares (NYSEArca: PALL) has outpaced SLV and SIVR among precious metals ETFs.
A recent decline in silver volatility was a tell that the white metal was on the cusp of a rally. In May when the gold/silver ratio was residing at its highest levels since 2010, silver volatility was spotted near its lowest levels in a decade, indicating limited downside risk. [Silver ETFs Regain Lost Shine]
“Prior to the 2008 crisis, the ratio of gold to silver was about 50. It spiked to near 84 during the 2008/9 crisis and declined to near 32 in 2011. Due to its larger industrial demand base, absent a stumble in the global economy, the ratio of gold to silver is likely to continue to decline in our view,” said ETF Securities. “With total silver demand increasing on the back of a recovering global economy and total supply declining, notably due to reduced recycling from lower prices, higher prices are necessary help rebalance the supply demand deficit.”
ETFS Physical Silver Shares
