Metal ETFs are Shining Bright


Despite last week’s four-day rally in the U.S. stock markets, the Dow, S&P and Nasdaq Composite are lingering in negative territory for the year as the three major indices are currently down 17.7%, 16.2% and 9.3% respectively as of Friday the 13th close. Investors who may be more risk averse can find some comfort in metals Exchange-Traded Funds as precious metal futures serve as safe-haven plays.

Gold managed to settle above $1000/ounce on February 20th when its front contract for April delivery closed at $1002.2/ounce, a level not seen since its record peak close of $1004.3/ounce on 3/18/08. Investment inflows of gold bullion-backed ETFs such as the SPDR Gold Trust have seen gains as well.

Gold for April delivery which closed up $6.1 or 0.7% on Friday at $930.1/ounce for a third consecutive-day has closed in positive territory 24 times this year with the biggest daily dollar gain on 1/23 when it closed up $37/ounce or up 4.31%. Gold is currently up 5.18% year to date. The buying of physical gold has pushed gold-backed ETF’s such as SPDR Gold Trust (GLD) back above their 200-day moving averages.

The SPDR Gold Trust ETF has hit a record in gold holdings of 1,041.53 tons as of 3/12. SPDR Gold Trust and iShares COMEX Gold Trust which hold gold bullions have done exceptionally well so far in 2009 as each have gained 5.52% & 5.35% as of Friday’s close, and have traded above their 50-day moving averages for most of 2009. Moreover, PowerShares DB Gold Fund based on the Deutsche Bank Liquid Commodity Index that consists of future contracts on gold is also up 5.13% year to date. (See chart below for metal ETF's performance in 2009 so far.)

Other metal futures such as silver, copper, and platinum are also gaining ground amid market volatility in U.S. equities. Despite reaching their market peaks in March 2008, Platinum and Silver have also closed up more than 25 times this year and are currently outshining gold for the year, as each are up 12.97% & 17% in 2009.

Platinum for April delivery settled higher at $1063.6/ounce and Silver for May delivery rose to close at $13.215/ounce on Friday. Silver-bullion backed ETF such as iShares of Silver Trust and PowerShares DB Silver Fund are also flying high in 2009 as each are up 16.5% & 15.9% respectively for the year. Platinum has traded up on the government’s plans to boost the economy but it’s still off ~53% from its market peak close of $2276.1/ounce set on 3/5/08. The iPath DJ AIG Platinum ETF which tracks platinum futures contracts is also up 11.45% for the year. Platinum which is used in catalytic devices in autos and has been hit due to the weak economy, may also gain from a turnaround in the US automobile industry.

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