ETF Trends
ETF Trends

With global markets on shaky grounds, commodity exchange traded fund investors should take a step back and prepare for the year ahead.

On the upcoming webcast, Outlook 2016: Don’t Believe the Hype, James Butterfill, Executive Director and Head of Research & Investment Strategy at ETF Securities, will discuss various points of interest, like the Federal Reserve interest rate normalization and the volatility in oil markets, to help paint a clearer picture of where we are heading and how the commodities markets will be affected.

The recent market volatility, economic uncertainty and speculation of a more dovish Federal Reserve stance have all contributed to a rally in precious metals. For instance, the ETFS Physical Silver Shares (NYSEArca: SIVR) gained 11.3% year-to-date while the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) rose 12.2%. Both gold and silver ETFs are now trading back above their 200-day moving averages.

The precious metals have traditionally acted as a safe-store of wealth in times of market volatility. Moreover, due to the global risks and economic weakness, many anticipate the Federal Reserve may push off on additional interest rate hikes, which has weighed on the U.S. dollar and helped support further gains in metals – USD-denominated silver and gold are now cheaper to foreign buyers.

Moreover, even if the Fed hike rates, platinum and palladium may continue to strengthen on increased industrial demand. The two white metals are a major component in automobile catalytic converters, and an expanding economy may also help support increased automobile demand.

Over the past month, the ETFS Physical Palladium Shares (NYSEArca: PALL) gained 4.3% and the ETFS Physical Platinum Shares (NYSEArca: PPLT) rose 4.9%.

These commodity ETFs are also structured differently from what most fund investors may expect. The precious metals ETFs are physically backed, which means that the ETFs represent a share ownership of physical bullion holdings stored in Swiss or London vaults.

Financial advisors who are interested in learning more about investing ideas for 2016 can register for the Wednesday, February 10 webcast here.

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.