Gold and silver are two of this year’s best-performing assets. As both precious metals have raced to all-time highs, the largest ETFs providing physically backed exposure to the commodities are generating returns that are trouncing those offered by the S&P 500. The two stars of the commodities are also benefiting multicommodity ETFs, including the Neuberger Berman Commodity Strategy ETF (NBCM).
The actively managed NBCM, which celebrates its third birthday in ETF form this week, is also outpacing the S&P 500 this year. That confirms the benefits of counting gold and silver as components in its diversified basket.
NBCM can hold as many as 51 commodities from eight groups. But at the end of the second quarter, precious metals was the ETF’s largest sector exposure, according to issuer data. It’s a smart move and one accentuated by a 17.7% allocation to gold, more than double the ETF’s second-largest exposure.
Gold, Silver Catalysts Abound
Potentially boding well for NBCM’s status as an actively managed fund is that that management style implies flexibility. That means the team overseeing can potentially increase exposure to the two high-flying precious metals at a time when both are catalyst-rich.
Take the case of gold, which is moving higher alongside risk assets such as equities. As just two examples of potential sparks for gold, global central banks remain devoted bullion buyers, and the Federal Reserve is likely to lower interest rates again later this month. Lower rates increase the appeal of gold. That’s because the yellow metal doesn’t pay dividends or interest and Fed easing often weakens the dollar. That’s relevant to commodities, which are priced in U.S. currency.
For its part, silver may be showing signs of a temporary top following a stunning rally that took the white metal to prices last seen in the 1980s and beyond. But that wouldn’t be a significant drag on NBCM due to the ETF’s diversified approach. Additionally, some traders believe a short-term dip could invite more market participants into the silver arena. And that could perhaps further highlight the already-constricted supply.
“These structural deficits—five consecutive years of global supply shortfalls—have triggered a persistent short squeeze and even transatlantic air shipments of silver to meet demand. Physical tightness remains [acute. That’s especially so] as industrial recycling volumes lag and Indian import activity remains robust,” reported FXEmpire.
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