Home Brokerage The Best Precious-Metals ETFs to Invest in Right Now

The Best Precious-Metals ETFs to Invest in Right Now

by internationalbanker

By Alexander Jones, International Banker


With pronounced rallies observed in recent weeks, it is fair to say that precious metals are again on investors’ radars. Indeed, the justification for holding more quantities of gold, silver and other valuable metallic commodities is growing as the ongoing depreciation of the US dollar, elevated stress in the US banking sector and renewed threat of high, prolonged inflation support the need to broaden exposure to safe-haven instruments this year. As such, increased positions in precious-metals ETFs (exchange-traded funds) should make sense for investor portfolios going forward.

With gold moving back above $2,000 per troy ounce and hitting a one-year high in early April, for instance, it seems that the yellow metal’s current rally, which began in early November 2022, still has some legs for further appreciation. Silver, meanwhile, has surged past the $25.00 level for the first time in nearly a year, and platinum recently returned to the $1,000-plus level—early February being the last time it achieved this key psychological level. The precious-metals complex is in the midst of a potentially gargantuan move upward.

Several key factors can explain this bullishness. For one, the US JOLTS (Job Openings and Labor Turnover Survey) “Job Openings” report published on April 4 revealed that job openings dropped below 10 million in February for the first time in almost two years (to 9.93 million) and fell by some 632,000 from January. Analysts, by contrast, were estimating February’s number at 10.4 million just prior to the report’s release. These figures thus suggest that the recently overheated US labour market—and, as a consequence, wage inflation—is finally set to ease, which should prompt the U.S. Federal Reserve (the Fed) to implement a more accommodative monetary policy and begin easing rates sooner than expected. The weaker dollar likely to transpire from lower rates is, therefore, positive for precious metals—and, indeed, for most commodities—as US-denominated assets become cheaper for international investors to acquire.

Precious-metals markets will also undoubtedly be buoyed by the recent announcement from the influential OPEC+ (Organization of the Petroleum Exporting Countries) group of global oil producers that it will cut crude-oil output from May onward, which, in turn, is likely to keep inflation elevated for longer than policymakers have hoped. With precious metals proving effective as hedges against such inflation threats, the case for boosting exposure to precious metals has become more compelling.

And as fears over a potential large-scale US banking crisis continue to mount, investors will certainly be motivated to seek out the historically proven safety offered by precious metals. There are a handful of precious metal ETFs that offer just such protection:

  1. iShares Gold Trust Micro ETF (IAUM)

One of the lowest-cost precious-metals ETFs on the market with annual fees as low as 0.09 percent, the iShares Gold Trust Micro ETF (IAUM) seeks to replicate the performance of the price of physical gold, as referenced using the London Bullion Market Association (LBMA), which represents the global over-the-counter (OTC) bullion market.

With an inception date of June 15, 2021, IAUM is also one of the newest gold funds. Nonetheless, its low-cost profile has enabled it to become one of the most popular funds, with around $1 billion in assets under management (AUM).

The fund simplifies the process of gaining exposure to gold by removing the requirements for investors to buy, transport, store and insure physical gold. It uses a grantor-trust structure, with gold bars held in vaults. The trust issues shares on the NYSE Arca (New York Stock Exchange/Archipelago Exchange), which can be acquired by investors in blocks of 50,000 (each block is known as a “basket”) and exchanged for the underlying gold.

IAUM has generated around 9.5 percent in returns year-to-date as of early April, thus demonstrating its credentials as an attractive investment proposition in 2023.

  1. SPDR Gold Shares (GLD)

The largest physically backed gold ETF in the world with just shy of $60 billion in assets under management, SPDR Gold Shares(GLD) seeks to track the market spot price of gold. And like IAUM, it does this using the LBMA reference rate. Having been created in November 2004, moreover, it is also the oldest gold ETF trading today.

The SPDR Gold Trust holds gold bars and issues SPDR Gold Shares, representing units of fractional undivided beneficial interest in and ownership of the trust. The shares trade on the NYSE Arca under the symbol GLD and can be purchased by investors in blocks of 100,000 shares.

Year-to-date returns for GLD have been solid at almost 9 percent, with one-year, three-year, five-year and ten-year returns all being positive (2.81 percent, 6.54 percent, 7.87 percent and 2.04 percent, respectively), further underscoring the appeal of this particular fund.

  1. iShares Silver Trust (SLV)

Gold is not the only effective inflation hedge and safe haven within the precious-metals segment. “While gold tends to get the most attention, silver, along with platinum and palladium, is also an important piece of a precious metals portfolio,” Charles Sizemore, principal of Sizemore Capital Management, recently explained to Kiplinger. “While silver also has more industrial uses, and is thus somewhat sensitive to the economic cycle, it has also been a viable inflation hedge over time.”

In a similar vein to the IAUM gold fund already included in this list, the iShares Silver Trust (SLV) seeks to reflect generally the performance of the price of silver. The trust holds physical silver bars stored in bank vaults and issues shares to investors in exchange for silver, the value of which is again referenced using the LBMA.

But with a massive $11 billion-plus in assets under management, SLV dwarfs the size of its gold fund sibling. It is also the largest silver fund on the market, having been active since April 2006. And it continues to perform solidly. Although returns have been virtually flat so far in 2023, its performances over the past three years and five years have been more impressive, generating over 70 percent and 48 percent, respectively.

  1. abrdn Physical Precious Metals Basket Shares ETF (GLTR)

But perhaps investing in a single precious metal does not appeal as much as gaining exposure to the broader segment. If so, the abrdn Physical Precious Metals Basket Shares ETF (GLTR) will likely prove highly useful.

In this case, the shares are issued by abrdn Precious Metals Basket ETF Trust (“the Trust”) and are intended to track the performance of the price of a basket of gold, silver, platinum and palladium bullion, thereby gaining a much more diversified precious-metals exposure. Both the LBMA and LPPM (London Platinum and Palladium Market) are used as references.

Unlike gold ETFs, GLTR has performed poorly thus far this year, losing around 6.3 percent year-to-date (YTD) due to the approximate 10 to 15 percent losses racked up by platinum and palladium. Extending the holding period, however, significantly strengthens the case for holding this basket; indeed, five-year returns stand at a sizeable 28.25 percent.

It is worth noting that the diversification offered by this fund comes at a higher cost, with an expense ratio of 0.60 percent. But for those seeking a cost-effective and convenient way to gain access to the most liquid precious metals, this physically backed instrument suffices.

  1. iShares MSCI Global Metals & Mining Producers ETF (PICK)

For those seeking less volatility than is often exhibited by precious metals and commodities in general, investors can gain exposure to mining companies to generate equity returns instead. iShares MSCI Global Metals & Mining Producers ETF (PICK) offers such an opportunity, albeit in combination with other producer metal segments, such as steel, copper and aluminium. The fund is thus more effective for precious-metals investors as a portfolio-diversification option.

It should be emphasized, however, that gold and silver producers are excluded from this fund, and it therefore only facilitates exposure to a specific segment of the precious-metals complex, namely the likes of platinum, palladium and rare-earth elements.

PICK replicates the returns of the MSCI ACWI Select Metals & Mining Producers Ex Gold & Silver Investable Market Index, which mainly comprises companies that are primarily engaged in the production or extraction of metals and minerals, in the mining of precious metals (excluding gold and silver) or in the production of aluminium or steel, as classified by the Global Industry Classification Standard (GICS).

Companies include large, mid- and small-cap securities across 23 developed-market and 24 emerging-market countries. The global diversification this fund offers raises the expense ratio to 0.39 percent. That said, with year-to-date returns of around 4.8 percent, PICK remains a solid proposition for investors.


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