Basket Of Metals Always Better Than Gold

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This week, gold fell to a new six-month low, down below $1,600 for the first time since July 2012, likely disappointing the scores of investors currently investing in gold.

In the rush into major gold funds like the SPDR Gold Trust (NYSEArca:GLD) and the iShares Gold Trust (NYSEArca:IAU), however, investors seem to have forgotten that gold isn't the only precious metal out there that can be used as an inflation hedge.

Just as with any asset class, passive investors would do better to diversify their precious metals exposure than to put all of their eggs in one shiny basket. Single securities will sometimes beat the diversified basket, but active pickers have to contend with single-security risk-right now, that risk obviously being that GLD and IAU could fall 7 percent in three months.

If you're thinking about expanding your precious metals allocation from gold into a broader basket, the choices before you are simple. The first question is, quite simply, how much gold you want in your basket. DBP, JJP and BLNG make much larger allocations to gold than their more diverse peers:70-80 percent vs. 50 percent for GLTR and RGRP and 0 percent for WITE.

The second question is whether you want exposure to futures contracts or the physical metals themselves. The physical metals ETFs are cheaper than their futures-based counterparts and better indicators of spot prices, so are really the win-win situation here since they also provide the broadest coverage.

If you want a broad, diverse basket of precious metals, GLTR is the way to go (or WITE if you already own gold).

At the time this article was written, the author held no positions in the securities mentioned. Contact Carolyn Hill at chill@indexuniverse.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: DBP , GLD , GLTR , IAU , JJP

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