While stocks have been shaky, shiny metals have soared in recent months. Gold and silver have benefited from investors worried about a currency crisis. Industrial metals like platinum and palladium have come roaring back in the midst of a slow but fairly steady global economic recovery. Until recently, it was only possible to invest in these metals separately. Now there's an exchange-traded fund, ETFS Physical Precious Metal Basket Shares (symbol GLTR), that tracks all four.
A play on the word glitter, GLTR—which began trading Friday—is designed to be a one-size-fits-all approach to investing in metals. "[With this fund] you've got that blend of four metals in one part, so you don't have to make that decision about which one is going to outperform," says William Rhind, strategic director at ETF Securities. The firm already offers four separate ETFs that each invest in gold, silver, platinum, and palladium, all which track the spot price of each metal and are physically backed by underlying bullion held in underground vaults. The GLTR fund is set up the same way.
The broad-basket approach to investing in commodities (as opposed to investing in a single product) is gaining traction among investors. Funds like PowerShares DB Commodity Index Tracking (DBC), which tracks a range of commodities like gold, copper, and sugar, and PowerShares DB Agriculture (DBA) have fairly large asset bases and hold baskets of futures contracts of the commodities. (The former has more than $4 billion in assets and the latter more than $2 billion.) Experts recommend spreading your investments among a mix of assets. "The good thing about having exposure to more than one thing is that it's harder for things to actually blow up in your face," says Sean Brodrick, small-cap and natural resources analyst for the blog Uncommon Wisdom Daily.
Metals within the GLTR fund perform differently. "Gold is being driven by investment demand, of course, but also by fear of a potential currency crisis," Brodrick says. The case for silver is a bit more complex because its biggest use is within industry in products like LCD televisions and microprocessors, so it responds more to movements in the global economy. Investors have also flocked to silver in times of uncertainty. Often referred to as the "poor man's gold" because it's generally cheaper to purchase than the yellow metal, silver has outperformed gold this year. ETFS Silver Trust (SIVR) is up an eye-popping 36 percent year-to-date, while ETFS Physical Swiss Gold (SGOL) has returned 21 percent. As industrial metals, platinum and palladium are also tied to economic indicators like global car sales because both metals are used in the making of catalytic converters.
Tom Lydon, editor of ETFTrends.com, says investors should keep in mind that many of these precious metals, especially gold, have hit record highs in recent months. Lydon says a fund like GLTR is a potentially safer bet for those who are just beginning to invest in the metals because it's a diversified holding. "I think it makes sense for those considering getting into metals at this level," he says.
Lydon says GLTR could also be a long-term holding for investors who are interested in diversifying their portfolio, as opposed to more sophisticated investors who are making strategic bets on a single metal for a shorter period of time. "I think the four-metal offering is probably going to be treated a little bit more as a long-term investment because it's diversified," he says.
Experts say it's important to pick an ETF that maintains a relatively high trading level. "If it's too low a volume, it won't be a good investment no matter what the metals do," says Brodrick. During extreme cases like the flash crash in May, funds with low volumes may see their share prices actually go to zero during intra-day trading, Brodrick says.