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WITE-Washed by Plunging Metals Prices


Some baskets do not belong on a picnic. In the current market environment, a basket of multiple precious metals is proving to be anything but a picnic for investors. The ETFS Physical White Metals Basket Shares (WITE) proves as much.

WITE does not offer exposure to gold, which may be perceived as a good thing. Investors have fled gold-backed ETFs this year. Just this week, the iShares Gold Trust (NYSEArca: IAU) is down almost 7% as gold futures plunged after the Federal Reserve implied it could taper its monetary easing efforts later this year with an outright end to the program perhaps arriving sometime in 2014. [Gold ETFs Shed $45 Billion]

The lack of gold exposure has not helped WITE because the ETF is a combination silver, platinum and palladium play. Ultra-volatile silver has been caught between a rock and a hard place. Monetary easing has been viewed as necessary to fuel further upside in precious metals, but nearly half of silver demand is reportedly tied to industrial use. The Fed said it sees diminished risks to the U.S. economy and labor market, implying the economy here is improving, which should be good news for silver. Still, the iShares Silver Trust (SLV) is down 9% this week and silver makes up 51.2% of WITE’s weight. [Silver Faring Worse Than Gold]

Compounding WITE’s woes have been retrenchment in platinum prices. The ETFS Physical Platinum Shares (PPLT) is down 9% in the past month. That indicates platinum futures are taking their cues from gold and not rising on ongoing labor strife in South Africa, the world’s largest producer of that metal. Earlier this week, analysts said further declines in platinum prices could make it unprofitable for miners to produce the metal, possibly leading to steep job losses in South Africa. [Problems Looming For South Africa ETFs]

Platinum is 35.2% of WITE’s weight and the remainder of the ETF’s physically-backed lineup is a 13.6% allocation to palladium. Palladium prices are intimately tied to automotive demand because catalytic converters in China and the U.S., the world’s two largest auto markets, are produced with the metal. Unfortunately, for WITE any signs of improving demand here in the U.S. have been overshadowed by a 9% slump in China’s May vehicle sales.

ETFS White Metals Basket Trust

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of SLV.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.