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Precious Metal ETFs in Focus

Zacks Equity Research
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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 has led to a surge in prices of palladium-focused funds.


Factors Driving Prices


Gold and Silver


The Federal Reserve hinted at a possible rate hike in the December meeting. The current probability of a December rate hike of 25 basis points is 86.7%, per the CME Fed watch tool. Moreover, if a less dovish candidate like Kevin Warsh is selected to lead the Fed, it might lead to a fall in Gold prices (read: Rate Hike Odds Weigh on Gold ETFs).


However, per a Reuters article, which cited a latest report by a Russian news agency, the RIA, a Russian lawmaker’s recent visit to Pyongyang has revealed that North Koreans are prepping another long-range missile test. 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 rallying owing to greater demand and rising geopolitical uncertainty. Festive demand in India has been contributing to the increase in demand, as silver imports for the emerging market nation has increased.


Palladium and Platinum


The auto industry generates maximum demand for these two metals. The primary factor driving demand for palladium is that it is relatively cheaper than platinum. The increased appeal of palladium over platinum as a metal to be used in catalytic converters of gasoline vehicles has driven demand higher.


However, palladium prices have been rallying this year and have surpassed platinum prices for the first time in almost 17 years. Will this lead automobile manufacturers to switch back to Platinum to cut down on cost? The price difference is minute currently; hence it’s hard to predict the relative demand for the two metals.


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


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 $35.3 billion and charges a fee of 40 basis points a year. It has returned 10.5% year to date and 1.6% in a year (as of Oct 9, 2017). As such, GLD currently carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


iShares Silver Trust SLV


This is one of the most popular funds in the space offering exposure to the metal.


The fund has AUM of $5.5 billion and charges a fee of 50 basis points a year. It has returned 2.8% year to date but lost 4.2% in a year (as of Oct 9, 2017). As such, SLV currently carries a Zacks ETF Rank #3 with a High risk outlook.


ETFS Physical Palladium Shares PALL


This is one of the most popular funds in the space offering exposure to the metal.


The fund has AUM of $229.5 million and charges a fee of 60 basis points a year. It has returned 29.8% year to date and 38.6% in a year (as of Oct 9, 2017). As such, PALL currently carries a Zacks ETF Rank #3 with a High risk outlook.


ETFS Physical Platinum Shares ETF PPLT


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 $504.3 million and charges 60 basis points as fees per year. It has lost 2.5% year to date and 4.9% in a year (as of Oct 9, 2017). As such, PPLT currently carries a Zacks ETF Rank #3 with a Medium risk outlook.


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GOLD (LONDON P (GLD): ETF Research Reports
 
ISHARS-SLVR TR (SLV): ETF Research Reports
 
ETFS-PLATINUM (PPLT): ETF Research Reports
 
ETFS-PALLADIUM (PALL): ETF Research Reports
 
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