Tevarak/iStock via Getty Images
Tevarak/iStock via Getty Images
In Shakespeare's 1596 masterpiece, The Merchant of Venice, he wrote:
O hell! what have we here? A carrion Death, within whose empty eye. There is a written scroll! I'll read the writing. All that glitters is not gold; Often have you heard that told: Many a man his life hath sold. But my outside to behold: Gilded tombs do worms enfold. Had you been as wise as bold, Young in limbs, in judgment old, Your answer had not been inscroll'd: Fare you well; your suit is cold.
The message was that not everything shiny and superficially attractive is valuable. Meanwhile, precious metals are shiny and valuable. In 2021 and 2022, gold and palladium reached record highs, and silver was at a price over four times the level at the end of the last century. Platinum has been a laggard, but at just over the $1,000 per ounce level, the price has more than doubled since the end of 1999.
The Aberdeen ETFS Physical Precious Metal Basket Trust ETF (NYSEARCA:GLTR ) holds physical gold, silver, platinum, and palladium bullion. In June 2022, GLTR is not just gold, but it has a chance to glitter, and the odds favor the upside for the physical precious metals product.
Throughout much of 2021, gold traded on either side of an $1800 per ounce pivot point on the nearby COMEX futures contract.
As the chart highlights, gold rose to a marginal new all-time high of $2072 per ounce in early March 2022 as Russian troops crossed Ukraine's border, launching the first major European war since WW II. Gold corrected from the high above the $2000 level, reaching a low of $1787 in mid-May, and recovered to just below the $1850 level on June 9. Over the past weeks, the price has consolidated, straddling the $1850 level.
Gold and other precious metals face bullish and bearish factors in June 2022. Rising interest rates and the strongest dollar since 2002 put pressure on the precious metals sector. Meanwhile, the war and uncertainty in the geopolitical landscape are bullish factors. Responding to sanctions, Russia recently declared that 5,000 rubles are exchangeable for one gram of gold, implicitly backing the Russian currency with the precious metal. Central banks and governments worldwide continue to hold gold as an integral part of foreign currency reserves, validating gold's role in the worldwide financial system. Gold's consolidation is a combination of the current state of fundamental and technical influences.
When gold rose to a new high in March, it took the silver price higher. However, the volatile precious metal did not manage to make a higher high compared to levels seen in 2021.
The chart illustrates COMEX silver future's rise to $27.32 in early March, before selling emerged and took the price to a new low of $20.64 in May. Nearby silver futures fell to the lowest price since July 2020 and was sitting at the $21.80 level on June 9 as the market awaits the June 10 inflation data and the June 15 FOMC meeting where it expects the central bank to boost the Fed Funds Rate by 50-basis points to the 1.25% to 1.50% level. Silver is sitting closer to the recent low than the early March high as the volatile precious metal has not attracted investment or speculative buying in the current environment.
Russia and South Africa supply the world with palladium, a critical input in cleaning toxic environmental emissions from cars and other transportation modes. Palladium is also a catalyst in oil and petrochemical refineries and fiberglass manufacturing and has other industrial applications. The sanctions on Russia and Russian retaliation threaten palladium supplies in the U.S. and Europe, but the price had been rallying over the past years, making higher lows and higher highs.
Palladium is a thinly traded precious metal on the CME's NYMEX division. The lack of liquidity causes high volatility as bids can disappear during corrections and offers tend to evaporate during rallies.
The dependence on Russian supplies caused the nearby NYMEX palladium futures price to explode to a record $3,380.50 per ounce high in early March, where it ran out of upside steam. Substitution and other factors led palladium futures to plunge to a $1,861 low in May before recovering and trading around the $2,000 per ounce level over the past weeks.
Platinum is another precious metal, but unlike gold, silver, and palladium, the price has been under pressure for years. Primary platinum output comes from South Africa. Russia is the other leading producer, with platinum production a byproduct of nickel output in Siberia's Norilsk region. Platinum is another precious metal with significant industrial applications.
Nearby NYMEX platinum futures traded to a high of $1,154 in early March and corrected to $899.49 in late April. Platinum recently attempted to break out above the $1,000 level, but failed and was below $980 per ounce on June 9.
The precious metals have corrected from the highs. Since the turn of this century, buying gold on corrections has been the optimal approach to investing in precious metals. Gold tends to lead to the other metals on the up and downside.
The most direct investment route for precious metals is via the physical market. Gold, silver, palladium, and platinum bars and coins offer the highest exposure level. Futures are the next level for investors and traders as they provide a physical delivery mechanism. ETF and ETN products move higher and lower with the metals. Mining shares offer another level of leverage as they often outperform the price action in the metals on the upside and underperform on the downside.
The Aberdeen ETFS Physical Precious Metal Basket Trust ETF provides a diversified approach to physical investment as it holds gold, silver, palladium, and platinum bars. GLTR's most recent top holdings include:
Top Holdings of the GLTR ETF Product (Yahoo Finance)
Top Holdings of the GLTR ETF Product (Yahoo Finance)
The ETF holds over half its assets in gold, with significant exposure to silver, and owns more palladium than platinum. At the $88.53 level on June 9, GLTF had over $1.1 billion in assets under management. The ETF trades an average of 60,449 shares daily and charges a 0.60% expense ratio.
Chart of the GLTR ETF Product (Barchart)
Chart of the GLTR ETF Product (Barchart)
GLTR closed 2021 at $89.45 per share and rose to $107.47 in March, an over 20% gain at the 2022 peak. At the $88.53 level on June 9, the ETF is lower than the December 31, 2021 closing level. For those looking to participate in the precious metals arena, GLTR offers a diversified approach and is trading at an attractive price, given its performance over the past years. Buying those precious dips in gold, silver, platinum, and palladium diversifies precious metals exposure as all that glitters includes all the rare metals.
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This article was written by
Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis. The author is long physical gold, silver, and platinum.