Put simply, it has been a dreadful year for gold bulls as the
SPDR Gold Shares (NYSE:
) has slid 22.4 percent. The iShares Silver Trust (NYSE:
) has been worse. Much worse, actually, with a year-to-date loss
of 35.3 percent.
This is how bad things have been for gold
, GLD in particular: GLD has seen outflows of nearly $20 billion
this year, according to BlackRock data. GLD now has $38.1 billion
in assets under management, which sounds nice, but the ETF was
once the second-largest in the world by assets. At best, GLD is
now the fifth-largest.
July ETF Inflows Top $44 billion
Investors looking for a real winner among precious metals and
the corresponding ETFs need look no further than palladium and
the ETFS Physical Palladium Shares (NYSE:
). PALL is up 3.4 percent this year and has been driven higher by
some key differences between the white metal and gold.
"The use of these two metals is quite different. Gold is used
primarily for jewelry (43.5% of 2012 demand) and investment
(35%), according to World Gold Council. Meanwhile, palladium is
used mostly as an auto-catalyst in the catalytic converters of
gasoline-powered cars to control exhaust emissions (67%), and
secondly in electronics (12%), according to palladium miner North
American Palladium," said S&P Capital IQ in a new research
The First Trust NASDAQ Global Auto Index Fund (NASDAQ:
), an ETF that has
hit a series of new all-time highs
this year confirms robust demand for palladium.
Most automobiles produced in the U.S. use palladium in the
assembly of catalytic converters. Not all of the top-six holdings
in CARZ, a group that combines for roughly 45 percent of the
ETF's weight, are U.S.-based, but nearly all of them manufacturer
cars and trucks in the U.S.
"Analyst Efraim Levy increased his estimate for 2013 U.S.
light vehicle sales to 15.6 million, from a prior 15.4
million projection; he forecasts 16 million in 2014. This
compares to about 14.4 million in 2012. Levy also expects strong
auto demand outside the U.S. Rising prosperity in emerging
markets, led by China, should drive global demand growth, partly
offset by lower European demand. As more cars are sold, more
catalytic converters are produced and more palladium is
demanded," said S&P Capital IQ.
Owning PALL has also proven to be a superior choice over being
long country ETFs that have mining equity exposure. Russia and
South Africa are the world's two largest palladium-producing
countries, but rising palladium prices have done nothing to help
the major ETFs tracking those nations. The Market Vectors Russia
) is down 12.1 percent this year while the iShares MSCI South
Africa ETF (NYSE:
) has been plagued
by tumbling gold prices
and has fallen 14.5 percent.
"Russian palladium production has fallen for three straight
years. Meanwhile, in South Africa work stoppages and strikes in
the mines have caused supply issues and South Africa lost 250,000
ounces, or about 10%, of its 2012 production due to the strikes,"
said S&P Capital IQ, citing North American Palladium (NYSE:
In other words, PALL is the best way to go for investors
looking for palladium exposure.
For more on ETFs, click
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