GLD’s Run Is Tip Of Precious Metals Iceberg

September 15, 2010


The ETF/ETN Factor

While gold is the “standard” when it comes to precious metals exposure, and it is often called the “new currency,” ETFs and ETNs allow investors access to the asset class in a way that they could not in the past, Koehler noted.

“The principal of diversification applies within an asset class,” he said of the run into other precious metal ETPs the market has seen. “Thanks to ETFs and ETNs, that diversification is a lot more accessible today.”

Cheaper entry price points, as well as vast industrial use for metals such as silver, platinum and palladium, are also factors behind the strong performance of ETPs such as Tuesday’s top-performing PALL, which gained 3.7 percent that day.

The PowerShares DB Silver (NYSEArca: DBS) and ETFS Physical Silver (NYSEArca: SIVR), also gained more than 2 percent on the day and rounded off the top five daily performers Tuesday, according to data compiled by

A Bond Bubble?

Similarly to precious metals, bonds are often thought of as safe bets in times of economic uncertainty. But some analysts are concerned that investors might be overexposed to bonds currently, and could be set up for disastrous returns if interest rates rise.

“We are actually currently rebalancing out of bonds,” Koehler said of his portfolios. “Because bonds have done so well, they are now outside of projected ranges and have hit rebalancing points.”

The bond bull-run started back in the early 1980s, and current bond values are “closer to the top than to the bottom,” Koehler noted, arguing that while there’s no need to completely sell off bonds in a portfolio, with stocks yielding similar totals to 10-year Treasurys, there are “better opportunities” out there right now.

“It’s a question of balance,” he said. “The 10-year Treasurys are yielding 2.7 percent and we should expect that return for the next 10 years. The Dow Jones industrial average, on the other hand, is yielding roughly that amount but has a possibility of future appreciation. So, there are better opportunities in stocks than in bonds right now."

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