How to buy gold, silver, platinum and palladium
Gold has attracted huge investment with platinum, too, enjoying good recent inflows as investors have sought to hedge their exposure to strike-hit platinum producers. For platinum and palladium, there are only physically-backed securities while, for gold and silver, there is a range of futures and other derivatives contracts as well as physically-backed offerings.
ETF Securities has ETPs that invest in physical gold, silver, palladium and platinum as well as a physical metals basket, which has a mixture of all four; iShares offers gold and platinum products. General commodity or metal ETPs may have some exposure to the metals but the amount may be small. Investors should remember that these metal-backed ETPs do not pay any dividends so the return can only come from an increase in the price of the metals.
The number of unit and investment trusts specialising in commodities has risen in recent years although, again, it is easier to access gold this way than other metals. Their performance is decidedly mixed.
Among investment trusts, BlackRock World Mining (BRWM) has about a fifth of its assets in gold, platinum, silver and diamonds and has lost 3% of its value over the past five years. A better performer is City Natural Resources High Yield (CYNC), run by New City Investment Managers, with just over a third of its assets in precious metals. Its net asset value has grown by over a quarter in the past five years. NCIM also runs Golden Prospect Precious Metals (GPM), which concentrates on precious metals. However, this trust has fallen 73% over the past three years.
Among unit trusts, the two big ones are BlackRock Gold & General, up more than a quarter over five years, which has more than three quarters of its assets in gold and the remainder mainly in cash or other precious metals and JPMorgan Natural Resources, with a third in precious metals. It has lost 12% of its value in the past five years.
Smith & Williamson Global Gold & Resources has more than 90% of its assets in gold, silver platinum and other precious metals and is up more than a third over the past five years.
While some pay dividends, others have no income. BlackRock World Mining and City Natural Resources High Yield investment trusts do offer income; the three unit trusts mentioned do not.
Funds invest mainly in shares rather than directly in the metals themselves, something that partly explains their recent lacklustre performance. Gold and precious metals companies have, until recently, lagged well behind the price of the physical metals.
Neil Gregson, manager of JPMorgan Natural Resources, says this is partly because their costs were high and they lacked financial discipline. These issues are now gradually being addressed and, in recent months, share prices have performed better.
Sandra Crowl, a member of the investment committee of fund manager Carmignac Gestion, says investors had been ignoring miners in favour of physical ETPs. But they were missing out on dividends and the prospect of capital gains as the valuation of mining stocks improves.
But she adds: "It is vital to be a good stock picker. You have to look for companies with a good exploration record, good production capability and good control of their operating costs. That is especially true at the moment - the salaries of even truck drivers at some western Australian mines are massive, to attract staff to take the jobs."
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