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Trends in Precious Metal ETFs

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Trends in Precious Metal EFTs

It should really come as no surprise that investors are noticing that precious metals EFTs are losing their luster. Part of the problem has been the rapid expansion of precious metal fund from the time of their inception until now. Investors who look only at the past rate of growth and compare it to the current growth rate are hesitant to continue investing in EFTs, especially gold EFTs.

Simply tracking the growth rate of the top funds will illustrate the concern over EFTs.

A good question to ask is what is really going on inside of the EFT trading trends. The problem, if it can be called a problem, is primarily with gold. Other precious metals seem to be holding their value and are recovering from price fluctuations. Gold, on the other hand, is a little bit sketchy, and that is due to the many rumours that are circulating about gold.

First there is the pending gold cliff that is due to hit around 2017. This is the sudden decrease in the production of mined gold. Insiders within the industry expect that the amount of gold that is still in the earth will shrink because mining companies have not located any other major sources of gold in the last decade.

There is the constant speculation over what the price of gold will do in the coming years. Investors seem to forget that gold is both a commodity and a currency. The higher prices of gold that we have seen in the last ten years has been the result of weak monetary systems worldwide, and especially in the United States. The weak dollar has driven the price of gold nearly to $2000 per troy ounce.

The real question to ask is what will happen to the price of gold if the in-earth-supply dwindles as predicted. Isn’t that going to drive up the price of physical gold as supply and demand push the market? That could mean the end of gold EFTs, but certainly not the end of physical gold as a form of investment.

The focus here is on EFTs and as such, investors who buy into funds do not actually own any physical gold. They are simply funding the process to mine gold and in return earning a dividend on that investment. Well if there is no longer enough gold in the earth to mine, what good is the investment in mining future gold? It is not very good.

This is the largest problem with gold EFTs. The other precious metals are holding up to investor concerns. They do not share the same intensity as the rumors that surround gold. There is also another factor that silver and platinum do not share with gold. They are both heavily used in industrial components such as solar and tech-gadgets. Both the solar energy industry and the companies that manufacture cell phones, tablets, and computer circuits have a growing need for both platinum and silver. This is one of the reasons why investors are finding that other precious metal EFTs are recovering.

The concern over gold EFTs losing value is something to which investors must pay attention. It is really difficult to weigh short term fluctuations of gold prices with the sheer terror that are generated with rumors. The smarter investors understand this and strive to balance their portfolios against risk. This simply means that gold remains a healthy investment, but you, as an investor, must decide if you will risk gold EFTs or deal with the cost of investing in physical gold.


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