HoldingsGold, Silver, Platinum, and more
Managed byETF Securities
What do Olympic athletes, morticians, newlyweds and auto mechanics have in common? They all know the value of precious metals. Gold, silver, platinum and palladium are not only desirable and useful — it’s possible to invest in them as well. How can you get your hands on these hot commodities? You can grab your pickaxe and start digging, or you can invest in All That Glitters, a precious metals ETF that offers a basket of all four, the biggest of which is gold.
So why invest in gold?
Its value is the real deal and always has been. Since pretty much the beginning of time, gold has been considered an indicator of wealth. Everyone from Egyptian Pharaohs and kings to movie stars and rappers is guilty of flashing gold as a way to flaunt their fortune. Gold coins were even used as currency back in the day, and for good reason: people have always considered gold to be valuable. For a quick refresher course, read Talk Money To Me: My Precious.
There are a few main reasons why gold has maintained its value over time. Gold cannot be destroyed – it doesn’t rust or corrode and is fireproof up to 1,945º F. It cannot be counterfeited – you can try to add other alloys, but the scale will always give you away. It’s price can’t be artificially inflated or deflated (like limited edition Nike kicks). You have to drill deep into the Earth to find more – you can’t just make more, like paper money. Gold is the real deal. Always has been and it looks like it always will be.
The price of gold reached a two-year high after Brexit. Coincidence? I think not.
Like silence, it’s golden in times of economic and political uncertainty. When the going gets tough, the tough buy gold. Historically, buying gold has been a hedge against inflation, deflation, war and other geopolitical uncertainties for one simple reason: People seek stability during unstable times. When inflation rises, the value of paper money declines. When economies falter and/or banks fail (think The Great Depression and more recent housing market crash/Great Recession), the Federal reserve prints more money, which is a form of currency devaluation. And when political turmoil erupts, financial erosion follows. Case in point: The British economy took a nose-dive after it voted to leave the European Union back in June. Conversely, the price of gold reached a two-year high after Brexit. Coincidence? I think not.
Buying gold is considered a safe haven investment during global unrest. When people are on edge because of world events (like economic uncertainty, global terrorism and political upheaval), they flock to gold because it’s tangible, valuable and traditionally safe (higher demand = higher price). But when the world is calm and people feel safe, fewer people feel like they need the stability that gold provides, so they sell some of their holdings in gold.This lowers its price (less demand = lower price).
It’s good for more than just trophies and medals. Precious metals aren’t just available for investment. They are also physically useful and in high demand, which as we know from basic Supply and Demand Theory, makes them valuable. Because gold is durable, malleable, chemically unreactive and able to conduct both heat and electricity, it is used in a variety of industries — electronics, fashion, dentistry and jewelry. Sometimes their uses even overlap, like with gold grillz.
Silver is hoarded like gold for its value, but its price is also driven by its vast industrial uses in electronics, medicine and science. Formaldehyde and solar panels contain silver, as do batteries, jewelry and musical instruments.
Platinum, more costly than gold because it’s more rare, is used to make everything from turbine engines to pacemakers to wedding rings. Since platinum is harder than gold, it’s frequently used in a halo setting to keep a lockdown on all those tiny fringe diamonds.
You may not have heard of palladium, but thanks to the EPA, it’s in every car and engine-equipped machine in the United States. If you own a car, you know that in order to pass the annual inspection, your car needs a working catalytic converter to change harmful pollutants into less harmful emissions. And what material is needed in catalytic converters? You guessed it, palladium.
So maybe you don’t have a car, an engagement ring, gold grills, or an Olympic medal, but you are walking around with precious metals in your pocket. Cell phones contain silver, gold and palladium, and a lot of it. In 2015, the EPA estimated that every one million cell phones recycled yielded over 750 pounds of silver, 70 pounds of gold and 50 pounds of palladium.
Want to dig deeper into precious metals? GLTR, the underlying fund for All That Glitters, is issued by ETF Securities and has a 0.60% expense ratio with $213 million in AUM (assets under management). Actual stacks of gold, silver, platinum and palladium bars are kept in secure facilities in London and Zurich – very James Bond-esq. Gold bullion (i.e., bars) make up 59% of the holdings, with 30% silver and the remaining 11% split almost equally between platinum and palladium.
Bottom line: There is a real demand for these commodities in everyday items, and it’s also viewed as a hedge during times of economic uncertainty. With that being said, All That Glitters should not be your only investment, but it can be a component of a broadly diversified portfolio.