Despite speculation of an imminent Federal Reserve interest rate hike, precious metals-related exchange traded funds may still hold up ahead.
“I don’t think any immediate action from Fed would derail precious metals,” Maxwell Gold, Director of Investment Strategy at ETF Securities, told ETF Trends in a call.
The Federal Reserve has backpedaled on rate hikes before and many observers remain wary of any actual action coming out of the central bank.
“We believe the reticence of the Federal Reserve to continue to tighten monetary policy may extend the current negative real rate environment and may continue to benefit gold,” Gold said in a research note.
SEE MORE: Gold Miner ETFs Continue to Shine as Fed Rate Bets Fade
Gold explained precious metals may be one of the few option available in a “TINA” type environment where there is no alternative.
While precious metals have retreated in August with gold, silver, platinum and palladium posting negative monthly returns, the recent pullback may been seen as a positive sing for the current ongoing rally in precious metals as profit taking among investors are a sign of a well balanced market.
Moreover, we are still seeing high investment demand with record positive net sentiment, notably increased investment demand among Western countries, which helped offset weakness from Asian bullion and jewelry demand. Additionally, there has been reduced short positioning and greater inflows into precious metals ETFs.
[related_stories]Maxwell also argued that while Asian demand has been relatively weak so far this year, China and India could see demand recover over the next six to ten months, especially as the traditional wedding and gift giving seasons quickly approach.
Uncertainty has been a major market theme, pushing investors toward the safety of hard assets like precious metals, and quickly approaching presidential election may further fuel volatility.
“We are in period of episodic volatility,” Gold said. “The level of volatility has been magnified this year.”
SEE MORE: Gold ETFs May Still Maintain Their Momentum
Investors can gain exposure to these precious metals through a number of physically backed ETF options, including ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), ETFS Physical Silver Shares (NYSEArca: SIVR), ETFS Physical Platinum Shares (NYSEArca: PPLT) and ETFS Physical Palladium Shares (NYSEArca: PALL). ETF investors can also use the ETFS Physical Precious Metals Basket Shares (NYSEArca: GLTR) as a catch-all of all four precious metals.
For more information on the metals market, visit our precious metals category.