Gold Gains, Silver Shines

05/19/2016 9:00 am EST

Focus: ETFs

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and

Our three metals positions are shining; all have delivered for us, and I suspect that will continue to be the case in the months ahead, asserts Doug Fabian, editor of Successful ETF Investing.

Over the last three months, iShares Silver Trust (SLV) is up nearly 25%. The SPDR Gold Shares (GLD) saw a gain of nearly 17% over that period.

And by far the biggest winner was the Market Vectors Gold Miners (GDX), which shined an incredibly bright 82% in the three months ended April 29th. That, my friend, is a raging bull market.

The reasons for gold’s shine include the lack of any material interest rate hikes by the Fed anytime soon, a global debt explosion that’s sending money into hard assets like gold, a heightened fear factor in the markets due to geopolitical and fiscal instability.

In addition, there is the pernicious threat of so-called “negative interest rates” from many central banks around the world.

I have been writing about the intervention by central banks in the financial market for years.

The Fed, the Bank of Japan and the European Central Bank all have been trying to restart financial growth through a series of extraordinary measures that have inflated asset prices.

Quantitative easing was designed to artificially hold down interest rates so that central banks can purchase assets (mostly bonds) of weak companies or governments, and thereby keep them from defaulting on their debt.

The latest version of QE being implemented right now is negative interest rates.  This is another iteration of the grand experiment whereby banks charge depositors an interest rate rather than pay interest.

Negative interest rates have been in place now for almost a year in Europe, and for several months in Japan — yet both economies still are struggling for growth.

If Europe and Japan are unable to get their respective economies moving, then global growth risks really will start to weigh down financial markets.

Under these circumstances, it is our opinion that gold will not only be a profitable investment for your portfolio, but it also will represent a well-placed hedge against the unintended consequences of the failure of these financial institutions.

When it comes to owning gold, the ETF universe offers one fund with the distinct feature of actually allowing you to take physical possession of gold while also owning the gold in a low-cost ETF.

This fund is the Van Eck Merk Gold ETF (OUNZ). This fund allows you to redeem some of the money you’ve put into each via actual physical gold coins, gold bars or other forms of gold.

This feature is particularly appealing if you are the skeptical or distrustful sort of person who wants to own the actual physical commodity, and not just a piece of paper or an electronic statement from your brokerage firm stating that you own X amount of gold.

While this gold fund does charge fees for physical redemption, those fees may be well worth the price if your goal is to physically hold on to some fiscal peace of mind.

Subscribe to Successful ETF Investing here…

By Doug Fabian, Editor of Successful ETF Investing.

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