Are Precious Metals ETFs Broken?

November 15, 2018

What is evident, however, is that the difference between spot and near-month futures contracts becomes negligible over the long term. Consider the full seven-year period of price manipulation in silver: Can you spot the days and times when spoofing occurred?


Source: Bloomberg; data as of Nov. 14, 2018


9 Futures-Based ETFs Exposed

Still, just because manipulation results in momentary price discrepancies on the order of fractions of a penny doesn't mean somebody isn't making a lot of money from it (or that the practice should be legal). But for investors concerned about price manipulation blowing up their ETFs … well, we don't think that's particularly likely.

There are a number of futures-based precious metals ETFs that would have been exposed to price manipulation during the time in which it was recorded to occur. These ETFs are listed below:


Futures-Based Precious Metals ETFs Exposed To Price Manipulation
Ticker Fund Issuer AUM ($M) Expense Ratio Spread
AGQ ProShares Ultra Silver ProShares 180.80 0.95% 0.12%
DBP Invesco DB Precious Metals Fund Invesco 105.47 0.78% 0.08%
DGL Invesco DB Gold Fund Invesco 99.99 0.78% 0.05%
DGP DB Gold Double Long ETN Deutsche Bank 78.25 0.75% 0.10%
DZZ DB Gold Double Short ETN Deutsche Bank 21.99 0.75% 0.16%
DBS Invesco DB Silver Fund Invesco 17.58 0.79% 0.20%
DGZ DB Gold Short ETN Deutsche Bank 10.83 0.75% 0.11%
UBG ETRACS UBS Bloomberg CMCI Gold Total Return ETN UBS 3.40 0.30% 1.66%
USV ETRACS UBS Bloomberg CMCI Silver Total Return ETN UBS 1.82 0.40% 2.49%

Sources:, FactSet; data as of Nov. 14, 2018


(Other futures-based ETFs, such as the VelocityShares line and the iPath metals ETNs, were not trading during the full 2009-2015 window.)

Four of these ETFs are leveraged or inverse instruments, meaning they're meant to be held for a single day or less. Even so, these funds rebalance daily, a frequency that tends to smooth out any nanosecond long blip in the price of the futures contracts they hold.

The Invesco ETFs, meanwhile, hold futures contracts across the curve for months at a time, rolling at expiry to whichever contract on the futures curve will offer the most favorable roll yield. Momentary price blips are likely to have even less of an impact.

Finally, there are the UBS ETNs, which don't actually hold physical contracts at all, but are debt instruments that track the return of an index. These indexes rebalance monthly—which, again, smooths out momentary price discrepancies that arise.

ETF Investors Probably Didn't Notice

So, what does all this mean? Well, if you're staring closely, you can spot some bumps in the intraday trajectory of these nine futures-based ETFs—but only if you know what to look for and when to look for it.

All this said, the FBI investigation into this manipulation continues. In his plea deal, Edmonds said that he'd been coached on the practice by other traders, and that his bosses knew of his actions. As such, it's possible that more charges and information about specific instances of manipulation will be revealed.

But one has to wonder: If price manipulation were so powerful as to influence precious metals prices in a persistent way—a way that should have buy-and-hold investors headed for the exits—then why haven't all four precious metals markets performed better?

Gold and silver have been range-bound since 2013, while platinum is down almost 50% since 2013. Only palladium has performed well, rising 115% since the start of 2016 (read: "ETF Of The Week: Palladium ETF Shines").

Contact Lara Crigger at [email protected]

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