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Precious metal ETFs have been in the spotlight lately. Rising geopolitical risks have increased the appeal of some of these funds as safe-haven investments. Moreover, increased demand for palladium and lower prices for platinum has led to a surge in prices of palladium-focused funds.
Factors Driving Prices
Gold and Silver
The Federal Reserve hiked its key rates by 25 basis points in the December meeting. However, Jerome Powel, who was elected as the Fed chair, is expected to not steer much from the current Fed policy. Moreover, the Fed kept its outlook for three rate increases next year.
The Bank of England and European Central Bank kept their key interest rates intact. This provided support to gold prices.
However, geopolitical risks have been on the rise. Last month, North Korea launched a Hwasong-15 missile with improved technology that flew over Japan in a latest show of force. This led to an increase in gold prices, as investors flocked to safe haven investments (read: ETF Strategies to Benefit from North Korea Tensions).
Moreover, silver prices have been volatile owing to relatively lower demand and rising geopolitical uncertainty. Growing appeal of crypto currencies has weighed on the demand for gold and silver, as investors shift their funds to bitcoin. This is because of fears of losing out on the bitcoin rally (read: How the Bitcoin Rally is Impacting Gold ETFs).
Palladium and Platinum
The auto industry generates maximum demand for these two metals. The primary factor driving demand for palladium was its lower price compared to platinum. The increased appeal of palladium over platinum as a metal to be used in catalytic converters of gasoline vehicles has driven demand higher. Platinum is more widely used in diesel vehicles, which has fallen out of favor lately, owing to the 2015 Volkswagen emissions scandal.
However, palladium prices have been rallying this year and have surpassed platinum prices for the first time in almost 17 years. Palladium hit a high of $1,022.70 last week, while platinum hit a low of $887.50 per ounce. In the long run, increasing demand for electric vehicles might drive demand for these metals lower.
This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.
It has AUM of $33.9 billion and charges a fee of 40 basis points a year. It has returned 8.5% year to date and 7.7% in a year (as of Dec 14, 2017). As such, GLD carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
This is one of the most popular funds in the space offering exposure to the metal.
The fund has AUM of $5.2 billion and charges a fee of 50 basis points a year. It has lost 0.6% year to date and 6.0% in a year (as of Dec 14, 2017). As such, SLV carries a Zacks ETF Rank #3 with a High risk outlook.
This is one of the most popular funds in the space offering exposure to the metal.
The fund has AUM of $230.6 million and charges a fee of 60 basis points a year. It has returned 51.4% year to date and 40.1% in a year (as of Dec 14, 2017). As such, PALL carries a Zacks ETF Rank #3 with a High risk outlook.
This fund is designed to track the spot price of the platinum bullion. It is the only pure play investors can get on the metal, beyond buying shares of platinum miners or buying futures contracts.
The fund has AUM of $522.6 million and charges 60 basis points as fees per year. It has lost 2.5% year to date and 4.1% in a year (as of Dec 14, 2017). As such, PPLT carries a Zacks ETF Rank #3 with a Medium risk outlook.
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Precious Metal ETFs in Focus
Precious metal ETFs have been in the spotlight lately. Rising geopolitical risks have increased the appeal of some of these funds as safe-haven investments. Moreover, increased demand for palladium and lower prices for platinum has led to a surge in prices of palladium-focused funds.
Factors Driving Prices
Gold and Silver
The Federal Reserve hiked its key rates by 25 basis points in the December meeting. However, Jerome Powel, who was elected as the Fed chair, is expected to not steer much from the current Fed policy. Moreover, the Fed kept its outlook for three rate increases next year.
The Bank of England and European Central Bank kept their key interest rates intact. This provided support to gold prices.
However, geopolitical risks have been on the rise. Last month, North Korea launched a Hwasong-15 missile with improved technology that flew over Japan in a latest show of force. This led to an increase in gold prices, as investors flocked to safe haven investments (read: ETF Strategies to Benefit from North Korea Tensions).
Moreover, silver prices have been volatile owing to relatively lower demand and rising geopolitical uncertainty. Growing appeal of crypto currencies has weighed on the demand for gold and silver, as investors shift their funds to bitcoin. This is because of fears of losing out on the bitcoin rally (read: How the Bitcoin Rally is Impacting Gold ETFs).
Palladium and Platinum
The auto industry generates maximum demand for these two metals. The primary factor driving demand for palladium was its lower price compared to platinum. The increased appeal of palladium over platinum as a metal to be used in catalytic converters of gasoline vehicles has driven demand higher. Platinum is more widely used in diesel vehicles, which has fallen out of favor lately, owing to the 2015 Volkswagen emissions scandal.
However, palladium prices have been rallying this year and have surpassed platinum prices for the first time in almost 17 years. Palladium hit a high of $1,022.70 last week, while platinum hit a low of $887.50 per ounce. In the long run, increasing demand for electric vehicles might drive demand for these metals lower.
Let us now discuss a few ETFs focused on providing exposure to the space (see all Precious Metals ETFs here).
SPDR Gold Shares ETF (GLD - Free Report)
This fund offers physical exposure to gold. It seeks to track the performance of the gold bullion and might turn out to be a cost-efficient way of gaining exposure to the commodity even after accounting for the fund’s expenses.
It has AUM of $33.9 billion and charges a fee of 40 basis points a year. It has returned 8.5% year to date and 7.7% in a year (as of Dec 14, 2017). As such, GLD carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares Silver Trust (SLV - Free Report)
This is one of the most popular funds in the space offering exposure to the metal.
The fund has AUM of $5.2 billion and charges a fee of 50 basis points a year. It has lost 0.6% year to date and 6.0% in a year (as of Dec 14, 2017). As such, SLV carries a Zacks ETF Rank #3 with a High risk outlook.
ETFS Physical Palladium Shares (PALL - Free Report)
This is one of the most popular funds in the space offering exposure to the metal.
The fund has AUM of $230.6 million and charges a fee of 60 basis points a year. It has returned 51.4% year to date and 40.1% in a year (as of Dec 14, 2017). As such, PALL carries a Zacks ETF Rank #3 with a High risk outlook.
ETFS Physical Platinum Shares ETF (PPLT - Free Report)
This fund is designed to track the spot price of the platinum bullion. It is the only pure play investors can get on the metal, beyond buying shares of platinum miners or buying futures contracts.
The fund has AUM of $522.6 million and charges 60 basis points as fees per year. It has lost 2.5% year to date and 4.1% in a year (as of Dec 14, 2017). As such, PPLT carries a Zacks ETF Rank #3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>