Volatility Could Open Up Opportunities for Precious Metals in 2021

When there’s uncertainty floating around in the capital markets, that could open up opportunities for precious metals. Uncertainty could equate to volatility, which could spur a movement to the safety of precious metals in 2021.

“The U.S. election is now less than a month away, and the fight for more or less stimulus seems to be the only thing anyone is talking about these days,” wrote Phillip Streible in Kitco News. “That argument is causing high volatility levels in the markets that you can use to your benefit for positioning into 2021. For instance, just this week, we saw a $2 range in silver, $59 in gold, $58 in platinum, 17.75 cents in copper, $640 in bitcoin, $4.50 in crude oil, and the list goes on and on. See if the two parties can agree on a stimulus package that will pressure the dollar, causing another surge in inflation expectations. Still, if talks break down, another washout will occur, giving you opportunities to build your 2021 portfolio.”

Investors who can’t wait until then and are looking to get gold exposure can look at funds like SPDR Gold Shares (NYSEArca: GLD)and the SPDR Gold MiniShares (NYSEArca: GLDM). Precious metals like gold offer investors an alternative to diversify their holdings, and like other commodities, gold will march to the beat of its own drum compared to the broader market.

As a backdoor play, ETF investors can get gold exposure via miners using the following funds:

  • VanEck Vectors Gold Miners (NYSEArca: GDX): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE® Arca Gold Miners Index®. The index is a modified market-capitalization weighted index primarily comprised of publicly traded companies involved in the mining for gold and silver.
  • Direxion Daily Jr Gold Miners Bull 3X ETF (NYSEArca: JNUG): seeks daily investment results, before fees and expenses, of 200% of the daily performance of the MVIS Global Junior Gold Miners Index. The index includes companies from markets that are freely investable to foreign investors, including “emerging markets,” as that term is defined by the index provider.
  • Direxion Daily Gold Miners Bull 3X ETF (NYSEArca: NUGT): seeks daily investment results, before fees and expenses, of 200% of the daily performance of the NYSE Arca Gold Miners Index. The index is comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in the mining for gold and, in mining for silver.

ETF Opportunities in Silver

ETF investors looking to get in on the silver action can look to funds like the iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR), two of the largest ETFs backed by holdings of physical silver:

  • SLV seeks to reflect generally the performance of the price of silver. The Trust seeks to reflect such performance before payment of the Trust’s expenses and liabilities. It is not actively managed. The Trust does not engage in any activities designed to obtain a profit from, or to ameliorate losses caused by, changes in the price of silver.
  • SIVR seeks to replicate, net of expenses, the price of silver bullion. The shares are backed by physically allocated silver bullion held by the custodian. All physical silver held conforms to the London Bullion Market Association’s rules for good delivery.

For those looking for leverage, they can look to ETFs like the VelocityShares 3x Long Silver ETN Linked to the S&P GSCI Silver Index ER (NasdaqGM: USLV)  and the ProShares Ultra Silver (NYSEArca: AGQ).

For more market trends, visit ETF Trends.

THEMATIC ETF RESOURCES