Precious Metals ETFs Outshining S&P 500 in 2024

Have you noticed the price of gold and silver lately? 

While many market observers fixate on rising Treasury yields and falling Magnificent 7 stocks, precious metals ETFs are outperforming the market in 2024. 

For the year through Wednesday’s trading, the SPDR Gold Shares ETF (GLD) has risen 11% and the iShares Silver Trust ETF (SLV) has gained 13% while the stock market proxy SPDR S&P 500 ETF Trust (SPY) is up 9%. 

While the S&P 500 crossing its all-time high in the first quarter is impressive, capping off its best start to a year since 2019, it’s more noteworthy that precious metals, a commodity group that might average 3-5% annualized returns over a decade, is outperforming a major stock index that just had its best quarter in five years.

Why Precious Metals ETFs Are Outperforming

Perhaps the biggest support for gold’s price in 2024 is the recent escalation of geopolitical conflicts in the Middle East and Ukraine. Demand for gold, with its long history as a safe-haven asset, can increase during these times as investors seek to protect their wealth. 

Gold and silver both have reputations as inflation hedges as some investors view the precious metals as a means to preserve the purchasing power of their assets during inflationary periods. 

The performance of precious metals ETFs can be influenced by various factors, and past performance doesn't guarantee future results. Here are some additional factors to consider: 

• Fed policy and interest rates: The Federal Reserve's monetary policy decisions can significantly affect the financial markets. In 2024, if the Fed pivots and lowers interest rates, it could weaken the U.S. dollar. A weaker dollar can make gold (priced in dollars) more affordable for international investors, potentially increasing demand and driving up the price. 
• Central bank activity: The actions of other central banks worldwide can also affect the price of gold. 
• Supply and demand dynamics: Changes in the supply and demand for gold and silver can significantly affect their prices. 
• Overall market sentiment: Investor sentiment toward riskier assets can influence the relative attractiveness of precious metals. 

If you're considering investing in precious metals ETFs, do your own research and understand the risks involved to determine if they align with your investment goals and risk tolerance.