ETF Holds Precious Blend
Source: The Wall Street Journal, Carolyn Cui (10/21/10)
"ETF allows a one-size-fits-all solution for precious metals investors."
The ETFS Physical Precious Metals Basket Shares, which will start trading on the New York Stock Exchange on Friday, is designed to hold a blend of four precious metals: gold, silver, platinum and palladium. It will be the first precious-metal basket to be launched in the U.S.
This year, gold is up 23% and platinum up 15%, eclipsed by the gains in silver and palladium, up 42% and 45%, respectively.
Many wealth managers and financial advisers want to own precious metals but have to make a choice of which one, said William Rhind, strategic director of U.S. business development at ETF Securities Ltd., which is managing the fund. "This allows a one-size-fits-all solution," he said.
However, because prices have had such a big rally already, future gains may be tougher. Analysts said that precious metals are vulnerable to short-term corrections, especially if investor views of the macroeconomic picture change. For example, all four metals plunged Tuesday in reaction to China's surprise move to raise interest rates.
The new product marks the latest foray into the U.S. market by ETF Securities, a London commodity ETF provider. The company runs four ETFs in the U.S. to track each of the metals, with total assets exceeding $2 billion.
For the new blended product, each share will be backed by 0.03 troy ounce of gold, 1.1 ounces of silver, 0.004 ounce of platinum and 0.006 ounce of palladium. The weights are determined by the metals' global industrial demand.
The new fund will store its metals in vaults managed by J.P. Morgan Chase & Co. in London and Zurich.