The U.S. dollar is one of this year's most disappointing developed market currencies, but that is not helping the commodities complex. Most commodities, an asset class denominated in dollars, are sagging, but some precious metals have been notable exceptions.
Among exchange-traded products, the ETFS Gold Trust (NYSE: SGOL) is up 9.4 percent year to date while the ETFS Physical Palladium Shares (NYSE: PALL) is up a stunning 26.9 percent. Sturdy precious metals prices are helping the ETFS Precious Metals Baskets Trust (NYSE: GLTR) to a year-to-date gain of more than 8 percent.
All That Glitters ...
GLTR holds a basket of physical gold, silver, palladium and platinum.
“Given this action in Precious Metals amid the FOMC rate backdrop, we are also looking at diversified 'Precious Metal' ETPs that generally appeal to those investors and portfolio managers whom prefer 'basket' exposure to the space as opposed to betting on specifically Gold or Silver for example,” said Street One Financial Vice President Paul Weisbruch in a note out Wednesday.
Although gold and silver loom large in GLTR, palladium, until this week, has been helping the ETF surge.
“The background for palladium is for good industrial demand and likely a significant market deficit this year, and on top of course you’ve got this speculative squeeze,” Mitsubishi analyst Jonathan Butler said, reported Reuters.
Palladium supply is expected to be in a deficit again this year, which could help deliver more upside for PALL and GLTR.
“Traders reported a reluctance to lend the metal, suggesting tightness in near-term supply. Chart patterns indicate that the metal is vulnerable to a sell-off from these elevated levels, however, technical analysts said,” according to Reuters.
Macro Trends, Influences
While precious metals retreated Wednesday after the Federal Reserve boosted interest rates, inflation could portend more benefits for gold and friends.
As Benzinga reported earlier this year, “Data suggests inflation is rising, which could bode well for gold ETFs because the yellow metal is often embraced as an inflation hedge. Accounting for inflation, real U.S. interest rates are in negative territory, further increasing the potential for out-performance by gold relative to other safe-haven assets.”
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