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
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
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