Metals Shine for Wary Investors

04/16/2013 7:00 am EST


Inflation and global worries are making metals attractive, writes Chloe Lutts of Cabot Wealth Advisory.

With distrust of banks high, monetary policy easy, and a sequence of financial crises still in short-term memory, it's no surprise that many investors today are interested in investing in gold and precious metals as a hedge against inflation, financial panic, geopolitical unrest, and other worries.

Plus, the recent history of gold and other metals prices is pretty inspiring:

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If you're one of those investors who would like to hold some of their assets in metals, you could always just buy some gold or silver coins and put them in a safe deposit box. But if you already have a portfolio of stocks or a brokerage account, there are easier ways to get precious metals exposure.

If gold is your preferred flavor of precious metal, the closest thing to buying a bar and putting it in your safe is buying shares of SPDR Gold Trust (GLD), the largest physically backed gold exchange traded fund.

This fund is designed to closely track the price of physical gold by holding its own reserves of the metal. You can't exchange your shares for gold bars, and there are some expense fees, but it's otherwise pretty close to owning gold.

Of course, the advantages over owning gold yourself are that the fund is exceptionally liquid, and you can buy and sell in your regular brokerage account. GLD was most recently recommended in the Investment Digest by Systems and Forecasts Editor Marvin Appel.

If you like the idea of a physically-backed ETF but would like a little diversification among metals, Forbes/ISA Closed End Fund and ETF Report Editor Jack Colombo has a recommendation for you:

“The ETFS Physical Precious Metals Basket Shares (GLTR) buys and holds four precious metals: gold, silver, platinum, and palladium. The physical metal is held by HSBC, which conforms to the relevant rules for good delivery for each metal.

"Each fund share holds 53.6% of gold, 35.4% of silver, 6.5% of platinum, and 4.5% of palladium. The shares are currently trading at $90.76, a slight discount of -0.46% off the value of the metals it holds at $91.50. The expense ratio is low at 0.6%. The fund's main value is that it will precisely track a basket of precious metals without the complicating effects of futures contracts.”

Lastly, if you'd like a value proposition along with exposure to metals prices, Intelligence Report Editor Richard Young recently offered an interesting idea based on the relative value of gold and another rare metal. Here's his recommendation:
“Buy ETFS Physical Platinum Shares (PPLT). The price of platinum is out of balance. Of the four common precious metals, platinum is the rarest. All the platinum in the world could fit into a decent-sized living room.

"Adding to platinum's allure is the ever-increasing demand for clean air. Automotive catalytic converters need a certain amount of platinum to enable them to clean the toxic fumes from your vehicle's exhaust. Without it, terrible smog and pollution of the Mexico City variety would be the norm in every major city.

"Another platinum price booster is the geopolitical risk associated with the locations of the world's reserves of the metal. About 70% of the world's platinum supply is South African. If you haven't been watching the news, you missed stories of riots and fighting at the mines there last year. The other major platinum supplier is Russia, no stranger to political unrest.”

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