The Timing is Right for Commodity ETFs

As investors consider ways to diversify a stock and bond portfolio, it may be prudent to consider alternative assets like commodity ETFs that offer potentially uncorrelated returns to traditional assets.

“This year is the first year where you’ve seen three things come together: you’ve seen flows, you’ve seen interest, right – meaning that people are talking about it, and then you’ve seen activity in them in the market itself,” Steven Dunn, Executive Director and Head of Distribution for ETF Securities, said at the Inside ETFs 2018 conference. “To me, those three indications in the past, we might have had someone that was interested, but we haven’t seen those other aspects, so this could be a really interesting year for commodities.”

Investors who want to access precious metals may consider a number of physically backed metals-related ETFs as a way to diversify a traditional stock and portfolio, 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.

The various ETFs come with their own characteristics. For instance, something like gold is traditionally seen as a safe-haven play or a safe store of value in volatile conditions or during periods of rising inflation and a weakening U.S. dollar. On the other hand, other metals like silver, platinum and palladium enjoy robust industrial demand, which may be particularly noticeable in an expanding global economy.

“If you put them all together, you get a really interesting diversification component associated with that. That’s the real takeaway,” Dunn said.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.