Precious Metal ETFs to Hedge Market Volatility | ETF Trends

With the fixed-income and equities markets swinging, investors may turn to precious metals exchange traded fund to hedge increased volatility.

“It would be wrong to conclude that the outlook for the gold market over the remainder of 2015 and beyond depends solely on the evolution of U.S. monetary policy, and that Fed tightening can only mean lower prices,” head of commodities research at Capital economics, Julian Jessop, said on CNBC. “What’s more, even over briefer periods, safe-haven demand and buying from key emerging markets can more than offset headwinds from developments in the U.S.”

Moreover, Jessop argued that gold demand could rise as investors hedge inflationary pressures and the Russian central bank bolsters its bullion stores to diversify away from U.S. dollars.

Investors are also shifting into gold. According to ETF Securities data, investors funneled about $5 million into long gold ETFs, such as SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL). Additionally, traders pulled $10 million out of short gold exchange traded products. [U.S. Economic Uncertainty Brings Out Gold ETFs’ Luster]

COMEX gold futures were trading around $1,179.5 per ounce Friday.

“Gold is still viewed as a very defensive safe haven asset, but I guess at the margin, that U.S. dollar strength has limited any upside,” director of research at ETF Securities, Martin Arnold, said in the article. “In the last week, we have started to see more inflows into gold, modest inflows, but that’s generally how it starts. We did see more optimistic positioning in terms of the flows, people taking their shorts off and adding to longs.”

Silver rebounded in May, including the iShares Silver Trust (NYSEArca: SLV), ETFS Physical Silver Shares (NYSEArca: SIVR) and PowerShares DB Silver Fund (NYSEArca: DBS). Silver was also the best performing precious metal last month, but it has somewhat pulled back since last month’s high. [Silver ETFs Outperform Other Precious Metals]