3 Precious Metals ETFs to Play the Commodities Boom
Now is an ideal time to get some exposure to precious metals
Investors are trying to find growth wherever they can. Right now, that means commodities. This goes beyond the price of oil and the rising prices at the gas pump. The Russian invasion of Ukraine is leading to skyrocketing wheat prices. Plus, rising fertilizer prices will mean that other commodity prices are likely to rise this summer.
But the commodities boom is also creating an opportunity for precious metals. This is a sector that underperformed equities in 2021. But there are several reasons to believe that 2022 will be a much better year.
A Perfect Storm for Precious Metals
First, demand for precious metals is rising as some industries reopen. Related to this, a second catalyst is the key role precious metals play in some of the emerging sectors of the economy. And third, precious metals have long served as a hedge against inflation. These are just a few of the reasons that demand for precious metals is expected to grow on a global scale at a compound annual growth rate (CAGR) of 5.6% over the next six years.
One way for investors to invest in precious metals aside from buying the physical metal is to invest in exchange-traded funds (ETFs) that are focused on precious metals. ETFs give investors an easy, liquid approach that doesn’t require dealing in futures contracts or purchasing bullion. In the remainder of this article, we’ll look at three ETFs that have a focus on precious metals in one form or another. For the purposes of this article, we’re looking at three funds that are not exclusively investing in gold and silver.
IShares MSCI Global Metals & Mining Producers ETF (BATS: PICK)
This fund invests at least 80% in the underlying securities or in investments that have the economic characteristics of the securities contained in the MSCI ACWI Select Metals & Mining Producers ex Gold and Silver Investable Market Index. The fund has been drawing significant interest from institutional investors in the past 12 months. However, the fund has been volatile over the last 12 months. PICK is down 10% from its 52-week high. However, it’s still up 10% in 2022. The fund has a net expense ratio of 0.39%.
Aberdeen Standard Physical Platinum Shares ETF (NYSEARCA: PPLT)
Platinum is an option for investors looking to gain exposure to precious metals without investing in gold or silver. The rare metal has many industrial applications including being used in medical equipment. And with clean energy being at the top of mind, platinum-based fuel cells can provide energy that is more cost-effective, clean and reliable than diesel. Platinum is primarily mined in South Africa. The fund is currently trading in approximately the middle of its 52-week range and is up 6% in 2022 even after a sharp sell-off in early March that correlated with the Russian invasion of Ukraine. The fund has a net expense ratio of 0.60%.
Another option aside from “traditional” precious metals is to invest in a fund with exposure to rare earth metals. As many investors know the benefit of investing in rare earth metals is that they are needed in many electric vehicle and clean energy applications. In fact, the rare earth metals market is forecast to increase by a CAGR of 12.3% through 2025. The caveat is that investors in this fund have to be comfortable investing in countries outside the United States. This includes countries such as Russia and China that may have competing interests. In the case of the REMX fund, it does not have exposure to Russia, but it does have exposure to China. The REMX fund is down about 10% year-to-date and has an expense ratio of 0.59%.