Topic: ETFs

ETF Stocks: Precious metal ETFs to hold

precious metal etfs

Precious metal ETFs have largely centred on gold stocks. While we continue to see the outlook for that precious metal as uncertain, for aggressive investors who want to hold precious metal ETFs, we have two of them below.

 In 2011, precious metal ETFS shot up along with gold. It rose to a high of $1,950 U.S. an ounce, while silver reached a peak of $48.58.

Gold prices then fell steadily, dropping to $1,050 an ounce in December 2015 for the first time since early 2010. That month, silver also declined to a five-year low of $13.65 an ounce.

Gold now trades above $1,500 and silver above $19. That reflects higher commodity prices. It also reflects the belief that slow global economic growth will keep interest rates low and raise the possibility of high inflation. Globally, political uncertainty also increases the appeal of gold for investors.

However, an improving U.S. economy could eventually push interest rates higher. In that event, gold and silver would likely drop.

ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (Toronto symbol XGD; ca.ishares.com) aims to mirror the performance of the S&P/TSX Global Gold Index; it’s made up of 36 gold stocks from Canada and around the world. The ETF began trading on March 23, 2001. Investors are charged an acceptable 0.61% MER.

The fund’s top holdings include Newmont Goldcorp, 18.2%; Barrick Gold, 17.2%; Franco-Nevada Corp., 10.6%; Agnico-Eagle Mines, 8.2%; Kirkland Lake Gold, 4.6%; AngloGold Ashanti, 4.5%; and Royal Gold, 4.4%.

The ETF cuts risk for investors by focusing on politically stable mining jurisdictions: Canadian firms comprise 64.0% of the fund’s assets, followed by the U.S. (23.8%), South Africa (10.2%) and Peru (2.0%).

ETFs: Here’s what silver investors should consider buying

GLOBAL X SILVER MINERS ETF (New York symbol SIL; www.globalxfunds.com) tracks the Solactive Global Silver Miners Index.

Set up in April 2010, the ETF follows 23 international firms that mine, refine or explore for silver. The fund has 51.2% of its assets in Canada. That’s ahead of Russia (14.1%), South Korea (13.9%), Mexico (8.3%), the U.S. (6.9%), and Peru (5.6%). Investors in the Global X Silver Miners ETF face an acceptable MER charge of 0.65%.

The quality of the fund’s top holdings should drive your future gains: Wheaton Precious Metals represent 23.2% of its assets; Polymetal International, 12.1%; Korea Zinc, 8.3%; Pan American Silver, 5.5%; Coeur Mining, 5.3%; SSR Mining, 4.9%; First Majestic Silver, 4.8%; Buenaventura, 4.8%; Hecla Mining, 4.4%; and Fresnillo plc, 4.2%.

Recommendation in Canadian Wealth Advisor: iShares S&P/TSX Global Gold Index and Global X Silver Miners ETF are buys.

For our view on how to make the best selection in individual gold stocks, read 9 ways to spot the best gold stocks with the lowest risk.

For a recent report on how to judge whether an ETF is right for you, read When an ETF investment is the right choice.

How attractive are precious metal ETFs as an investment compared to individual gold or silver stocks?

This post was originally published in 2014 and is updated regularly.

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