ETF Expert

Gold grabbed all of the headlines when it first broke the $1000 per ounce mark. It never gave up that support again, though it dropped from $1200 back to $1040-$1050 earlier in the year. (Review my prior recommendations on buying SPDR Gold Trust GLD at $1050 per ounce.)

After the yellow metal significantly pierced the $1200 per ounce level in May of 2010, the debate over future direction intensified. ”Bubble-blowers” suggest that gold is heading back below $1000. Others seem to think $1300 per ounce is an easily attainable 2010 goal. Still others believe that an inflation-adjusted price of $2100+ is just around the metallic bend.

Yet there are at least 8 ETFs that give investors access to different precious metals, including platinum, palladium and silver. One particular ETF, PowerShares DB Precious Metals (DBP) provides a futures contract method for gaining exposure to gold and silver.

Here are 8 Precious Metals ETFs in the first 5 months of 2010:

The fact that gold is outperforming both silver and platinum speaks to the singular purpose of gold right now; that is, investors are choosing gold as a safe haven, alternative currency to protect against fiat currency depreciation.

Since silver, platinum and palladium have industrial applications that extend beyond jewelry, China’s deliberate tightening and Europe’s “re-recession” dent the demand for commodities. Moreover, a rising dollar acts as a headwind to precious metals. (The fact that gold is going higher with a stronger dollar only solidifies the enormous gains that it might make in a dollar downturn!)

That’s not to suggest that silver (SLV, SIVR) hasn’t performed well relative to other investment selections. Yet one could expect silver, as well as platinum and palladium, to appreciate more in value if investors didn’t have questions about the well-being of the global growth story.

Nevertheless, I think it would be foolish to count out the other precious possibilities. In less than 5 months time, ETFS Physical Platinum (PPLT) and ETFs Physical Palladium (PALL) have amassed an astonishing $870+ million in assets. “Precious” few exchange-trade products have grown so large so quickly.

Keep in mind, while the demand for palladium and platinum in the economy itself is uncertain, the demand for ownership of the metals by investors is exceptionally robust. And one doesn’t get the sense that the buyers of these precious metals are looking for a short-term trade.

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