ETF Talk: Not Your Father’s Precious Metals — Part II

The rollout of exchange-traded funds (ETFs) focused on precious metals other than gold and silver is well worth bringing to your attention. Last week, I featured a fund that invests in platinum and this week, I will introduce you to a fund that is tied to a different precious metal, palladium.

It would not surprise me in the least if you never have invested in palladium or if you did not know that the exchange-traded fund, ETFS Physical Palladium Shares (PALL), hit the market last month. I have not recommended PALL, but I am impressed that its average daily trading volume has soared to 382,000 in less than a month. I normally look to see if a fund has average daily trading volume of at least 100,000 shares before even considering its mention, and PALL is almost four times that level in just its first month of existence.

PALL, issued by ETFS Palladium Trust, is designed to reflect the performance of the price of palladium bullion, less the trust’s expenses. The ETF’s shares are aimed at investors who want a cost-effective and convenient way to invest and to gain exposure in palladium, a rare, silvery-white metal that is used in electronics and in catalytic converters for automobiles.

The fund is down slightly since opening at $43.93 on Jan. 14, before closing at $43.25 on Monday, Feb. 1. However, it jumped 3.73% in a single day on Feb. 1. Also on that day, PALL’s percentage gain outstripped the performance of a prominent fund focused on gold, the SPDR Gold Shares (GLD), up 2.26%, and a fund targeting silver, the iShares Silver Trust (SLV), up 2.89%.

Beware that the rise and fall of each precious metals fund does not exactly mirror the performance of the precious metal that it attempts to track. The price of gold on Feb. 1 edged up 2.05% to reach $1,105.20 an ounce for the day, while silver jumped to $16.67 an ounce for a gain of 2.96%. Meanwhile, the actual price of palladium rose to $429, up $15 an ounce, or 3.62%. While those returns are not precise matches with their related funds, they still are reasonably close.

In times of inflation and market uncertainty, I find precious metals especially appealing. I actually recommended SLV Monday to subscribers of my ETF Trader service. Much like palladium, silver has fallen a bit lately, but I expect a reversal here soon. If you want to invest in a precious metal that has the potential to outperform the wider equity markets, precious metals ETFs give you that opportunity. Remember, however, that PALL and all precious metals ETFs can be very volatile — so be careful.

If you want advice about which ETFs to buy and to sell, please sign up for my ETF Trader service by clicking here. As always, I am pleased to answer your questions about ETFs, so do not hesitate to reach out to me if you have one. To send an ETF question to me, simply click here. You may see your question answered in a future ETF Talk.