Investing in precious metals ETFs

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The US consumer price index rose 7% in 2021, hitting a 39-year high. The rapidly rising rate of inflation significantly affects purchasing power since dollars do not stretch that far. A big driver has been central bank policy. The Federal Reserve has kept interest rates low while printing lots of money to keep the economy afloat during the COVID-19 pandemic, devaluing Fiat money In the process. This is leading more investors to look for ways to hedge against the continued rise in inflation.

One way to do this is to invest in precious metals, and the easiest way is to exchange-traded funds (ETFs) focused on precious metals. Here is an overview of some of the best precious metal ETFs.

Image source: Getty Images.

Precious metals ETF list

There are nearly 30 ETFs focused on precious metals. Some hold precious metals stored in bank vaults. Others make another type of investment, including derivatives such as choice Where futures contracts which still offer some direct exposure to metal prices. Of the two, the better option is an ETF that focuses on directly holding physical precious metals, as they tend to offer performance that matches price after fees reasonably well. The main precious metals ETFs to consider are:

Precious Metals ETFs

Stock symbol

Assets under management

The description

SPDR Gold Stock

(NYSEMKT:GLD)

$56 billion

An ETF that holds physical gold.

iShares Money Trust

(NYSEMKT: SLV)

$11.9 billion

An ETF that holds physical silver.

Aberdeen Standard Physical Platinum Shares ETF

(NYSEMKT: PPLT)

$1.1 billion

An ETF that holds physical platinum.

Aberdeen Standard Physical Precious Metals Basket Shares ETF

(NYSEMKT: GLTR)

$950 million

An ETF that holds physical gold, silver, platinum and palladium.

Aberdeen Standard Physical Palladium Shares ETF

(NYSEMKT:PALL)

$335 million

An ETF that holds physical palladium.

Data source: ETF database.

Here is an overview of these main precious metal ETFs.

SPDR Gold Stock

SPDR Gold Shares is the largest Gold ETFs. The fund’s only assets are gold bullion stored in bank vaults and cash. This strategy allows investors to participate in the rising price of gold without having to own the physical metal. This reduces costs (insurance and storage) and risks (theft or misplacement).

The ETF is very liquid. Because it trades on a high stock Exchange, holders can quickly sell their shares and convert them to cash when needed. Owners pay a relatively modest sum ETF expense ratio 0.4% in exchange for all of these benefits. Although the expense ratio has caused the SPDR Gold stock price to slightly underperform the price of gold over the long term, it may be worth the cost compared to the alternatives. For example, many gold stocks have underperformed the price of gold over the years due to mine development cost overruns, mismanagement and excessive leverage. For investors who want to roughly match the price performance of gold, SPDR Gold Shares is a great option.

iShares Money Trust

iShares Silver Trust is the largest silver ETF. The fund holds physical silver bullion stored in bank vaults. It allows investors to participate in rising silver prices with less hassle and risk of alternative investments such as buying silver stocks or buy silver coins.

The ETF is also very liquid and charges investors a reasonable ETF expense ratio of 0.5%. Although the fees have caused the fund to underperform the price of silver slightly over the years, it can be worth it. The ETF allows investors to approximately match the price of silver; alternative investments such as silver stocks can significantly underperform due to a myriad of issues.

Gold bars with charts in the background.

Image source: Getty Images.

Aberdeen Standard Physical Platinum Shares ETF

The Aberdeen Standard Physical Platinum Shares ETF allows investors to invest directly in platinum, a key precious metal used primarily to make catalytic converters for the automotive industry. The ETF holds physical bars stored in bank vaults.

The ETF is one of the few ways to invest in platinum. While an interested investor might buy jewelry made from platinum or platinum bars, there aren’t many publicly traded mining companies that focus on the rare industrial metal. Those who mainly mine platinum with other metals, giving their investors less direct exposure to platinum prices. This makes the fund’s 0.6% expense ratio even more reasonable.

Aberdeen Standard Physical Precious Metals Basket Shares ETF

The Aberdeen Standard Physical Precious Metals Basket Shares ETF provides investors with direct exposure to multiple precious metals. The ETF’s precious metals basket includes physical gold, silver, platinum and palladium. He holds physical bars of these precious metals in bank vaults. At the end of 2021, the fund’s net assets were approximately 57% gold, 26% silver, 12% palladium and 4% platinum.

The ETF offers broad exposure to a basket of precious metals at a reasonable cost, given its 0.6% expense ratio. It is one of the few investments that offers investors diversified exposure to major precious metals in a single vehicle.

Aberdeen Standard Physical Palladium Shares ETF

The Aberdeen Standard Physical Palladium Shares ETF allows investors to invest directly in palladium. Like platinum, palladium is mainly used for catalytic converters in cars. Other uses of palladium include jewelry and certain dental fillings and crowns. Like the other ETFs on this list, this one holds the precious metal in bank vaults.

The ETF is one of the few ways to invest directly in palladium. Few mining companies focus on the production of palladium. It is not as prevalent in jewelry as other precious metals, making the ETF’s 0.6% expense ratio a reasonable cost to gain exposure to this particular precious metal.

Many ways to invest in precious metals

There are many precious metal ETFs available, giving investors plenty of options. Most major precious metal ETFs focus on owning physical bars of a particular precious metal, giving investors direct exposure to the metal. Investors have a choice: they can focus on one metal if they think it will outperform the others, or they can consider buying a basket of precious metals ETFs or an ETF that holds a basket of precious metals for gain exposure to the four major precious metals. . Either way, investing in a precious metals ETF is an easy way to hedge against rising inflation.

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