The precious metals market has reached historic milestones this week, with spot gold prices (GCY00) shattering new records today above $2,757 per ounce, and December silver futures (SIZ24) reaching a remarkable 12-year high above $35 per ounce on Wednesday. This surge in prices highlights the growing demand for safe-haven assets, driven by persistent global economic uncertainties, escalating geopolitical tensions in the Middle East, and mounting anticipation around the U.S. presidential election. And beyond the usual suspects, even palladium (PAZ24) has gone parabolic, with the most active futures contract hitting a new year-to-date high as markets price in potential sanctions on supplies from Russia.
In response to this growing demand for hard, shiny assets, the abrdn Physical Precious Metals Basket Shares ETF (GLTR) offers a comprehensive solution, providing exposure to a diversified portfolio of physically-backed gold, silver, platinum (PLF25), and palladium. With Citigroup forecasting gold prices to surpass $3,000 per ounce and silver prices at $40, GLTR's unique strategy stands out as a compelling choice for investors ready to tackle the precious metals market head-on. Read on to discover how GLTR is positioned to benefit from these trends and what continues to drive this extraordinary bull run.
Overview of GLTR ETF
The abrdn Physical Precious Metals Basket Shares ETF (GLTR), launched in October 2010, is a commodities-focused ETF offered by Aberdeen Standard Investments. With its straightforward yet effective strategy, GLTR seeks to track the performance of physical precious metals through direct ownership of gold, silver, platinum, and palladium bullion.
GLTR's approach is simple but powerful. The fund maintains direct ownership of physical bullion, storing the metals in secured vaults to ensure asset safety. This strategy minimizes counterparty risk and offers both institutional and retail investors a cost-efficient way to access the precious metals market.
By focusing on direct metal ownership, GLTR maintains minimal credit risk, a feature that has become increasingly attractive in today's uncertain economic climate. It's also ideal for investors looking to participate in higher precious metals prices, without also assuming the operational risks and expenses associated with investing in mining companies.
The fund's portfolio is entirely allocated to its top holdings, consisting purely of physical bullion, with gold and silver making up the lion's share. This laser-focused approach has paid off, as evidenced by GLTR's impressive performance. With a 36.7% return over the past 52 weeks, GLTR is just about holding its own against the S&P 500 Index ($SPX). And on a YTD basis, the fund is up more than 31%.
GLTR's market presence is substantial, with $1.14 billion in assets under management. The fund's trading metrics show relatively tame market activity, with average daily share volume of around 25,000 shares. With somewhat lighter volume, investors may need to be patient on entries to ensure a favorable price.
While GLTR does not pay dividends, its value proposition lies in metal price appreciation rather than income generation. This aligns with the fund's primary goal of providing exposure to price movements for precious metals. The expense ratio of 0.60% is competitive for a physical precious metals fund, making it an attractive option for those seeking cost-effective exposure to this asset class.
What's Driving the Gold and Silver Rally in 2024?
GLTR's strategic allocation across precious metals has proven particularly prescient given the extraordinary market dynamics unfolding in Q3 and early Q4 2024. The bullish momentum has been primarily driven by several key factors.
Central bank buying has emerged as a dominant force, with China's central bank extending its gold purchases for the 17th consecutive month through March 2024 — setting a record for the longest reported streak of monthly purchases. This aggressive accumulation strategy, combined with similar moves from India and Turkey, has effectively created a new floor for precious metals prices.
The Federal Reserve's dramatic 50 basis point rate cut in September marked a pivotal shift in monetary policy, acknowledging the cooling labor market and inflation's gradual descent toward the 2% target. The rate cut's impact was immediate and significant, propelling both gold and silver to new heights.
The escalating Middle East conflict has also created an underpinning of demand. Analysts at JPMorgan write that the correlation between gold prices and U.S. real yields has broken down, suggesting a paradigm shift in how the market values precious metals during periods of geopolitical uncertainty. This decoupling has allowed gold to maintain its upward trajectory despite traditionally challenging conditions, like rising yields and dollar strength.
Separately, the silver market also presents a compelling narrative, driven by increasing industrial demand and a widening supply deficit. The market faces a structural shortfall of 215.3 million troy ounces in 2024, with demand across all sectors expected to reach 1.22 billion ounces, while mining supply remains constrained at just over 1 billion ounces. This deficit has become more pronounced as aboveground reserves continue to deplete, with analysts suggesting these stockpiles could run out within 12-18 months.
With concerns ramping up about the ballooning federal deficit ahead of the U.S. presidential election, the combination of persistent central bank buying, growing industrial demand, and heightened geopolitical risks suggests this precious metals rally has further room to run. Market participants increasingly view gold and silver as hedges against potential policy shifts and economic uncertainties in the coming months.
Conclusion
As the precious metals rally gains momentum, the abrdn Physical Precious Metals Basket Shares ETF (GLTR) stands out as a compelling option for investors seeking broad exposure. With its focus on gold and silver, impressive returns, and cost-effective exposure to physical metals, GLTR offers a timely opportunity to capitalize on the current bull run. Given the significant macro-level uncertainties fueling the current rally, GLTR could be a valuable long-term addition to a well-diversified portfolio.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
