In the world of precious metals, the most popular choice for investors over the years has been gold. This is for good reason as the SPDR Gold ETF (NYSE:GLD) is up over 165% in the last five years as the S&P 500 has gained a paltry 5%. Gold has also been a more convenient choice versus its peers due to the introduction of GLD in 2004.
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Recently several ETF firms have rolled out a number of commodity-tracking ETFs that have expanded the choices for investors searching out exposure to metals such as platinum, palladium and silver. Before the availability of precious metals ETFs, the only option for individual investors in search of metals exposure was through a futures account, buying and storing the physical metal or metal-related equities. (For more, see A Beginner's Guide To Precious Metals)
Over the last few years GLD has grown to become the second most widely held ETF in the world. Naturally, investors who have an interest in gold begin to look for similar opportunities and that is why the secondary precious metals became popular. The three metals that have shot up in popularity are silver, platinum and palladium. There are now ETFs available that track the futures price of all three metals, giving investors easy access to the niche metals.
The closest relative to gold is silver; the two go hand in hand for many reasons. The one major difference between the two is that silver is more than just a precious metal; it is also used in various industries throughout the world. The largest silver ETF is the iShares Silver ETF (NYSE:SLV), which began trading in 2006. The ETF has gained in popularity as the price of gold has moved higher and silver has moved along for the ride. Since 2009, SLV has outperformed GLD by a margin of 30%, 63% return versus a gain of 33% for GLD. However going back to 2007, GLD doubled the performance of SLV, gaining 82% versus 41%.
The first palladium-based ETF was introduced in January 2010, when the ETFS Physical Palladium ETF (NYSE:PALL) began trading near $43/share. The ETF closed out April at $54.80, a gain of 34% in just over three months. During the same time frame both SLV and GLD have struggled to eke out minimal gains.
Platinum ETFs have been around longer, going back to early 2008. That is why there are several options for investors looking to own a share of the market. Two Exchange-traded notes (ETNs), very similar to ETFs, hit the market in 2008: E-TRACS Long Platinum ETN (NYSE:PTM) and the iPath Dow Jones Platinum ETF (NYSE:PGM). Please note there are major differences between ETNs and ETFs as far as tracking and tax consequences. (For more, see Exchange Traded Notes - An Alternative to ETFs)
When it comes to gold equities, there are the big names like Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX), along with what investors refer to as the junior gold miners that may only have exposure to one small mine. Searching for equities that will offer exposure to silver, platinum, and palladium is more of a daunting task.
According to our TC2000 software there are nine stocks listed in the silver sector with the two largest being Silver Wheaton (NYSE:SLW) and Pan American Silver (Nasdaq:PAAS). Of the two, SLW is my pick in the sector as it has shown great relative strength, closing out the month of April at an all-time high. The palladium sector does not offer as many choices and there are only two pure-play stocks on the major US exchanges, North American Palladium (NYSE:PAL) and Stillwater Mining (NYSE:SWC). Both stocks hit one-year highs in April before pulling back to end the month.
Investors looking for a pure-play in the platinum sector that trades in the US will be out of luck. However, a new ETF launched in March, the First Trust Global Platinum ETF (Nasdaq:PLTM) is composed of a basket of stocks that are active in the platinum group metals sector. The ETF is composed of 25 stocks from around the globe and is a true global platinum investment option.
Which of the Four
Now that there are four choices in the precious metals sector besides gold, how should investors tackle the sector? I suggest determining the percentage of your portfolio that will be dedicated to the sector, then picking two to four of the investments listed in the article as a starting point.
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