Rising inflation is spurring strong demand for precious metals as investors rush to hedge at least a portion of their portfolios against a potential stock market correction. Furthermore, rising industrial and manufacturing activities amid the fast-paced macroeconomic recovery has been generating additional demand for precious metals. This trend is likely to continue because the Fed has said it expects inflation rates to rise further.
The global precious metals market is expected to grow at a 5.6% CAGR over the next six years.
While futures and option contracts are commonly used to trade precious metals, the higher risks and added expenses of such contracts make ETFs a viable alternative. We think lesser known precious metal ETFs Aberdeen Standard Physical Platinum Shares ETF (PPLT), Aberdeen Standard Physical Palladium Shares ETF (PALL), and Sprott Junior Gold Miners ETF (SGDJ) are well positioned to deliver solid returns in the coming months.
Aberdeen Standard Physical Platinum Shares ETF (PPLT)
PPLT tracks the spot price of platinum bullion (after deducting the fund’s expenses) and holds physical platinum bars in secure vaults located in London and Zurich. Priced off the London Platinum and Palladium Market (LPPM) specifications for “Good Delivery,” this ETF affords investors exposure to the metal beyond buying the shares of the few platinum miners, purchasing individual coins, or holding a futures contract on platinum. The fund is designed for investors who want a cost-effective and convenient way to invest in platinum with minimal credit risk. PPLT has $1.46 billion in assets under management (AUM).
PPLT has a 0.60% expense ratio, which is higher than the 0.49% category average. PPLT closed Friday’s trading session at $97.51, which is 30.5% above its 52-week low of $74.75. The ETF has gained 27.5% over the past year and 11.9% over the past nine months. The ETF has attracted $10.66 million in net inflows over the past month.
Of the 37 ETFs in the Precious Metals ETFs group, PPLT is ranked #17.
Aberdeen Standard Physical Palladium Shares ETF (PALL)
PALL reflects the performance of the spot price of palladium bullion, less the expenses of the trust’s operations, and holds palladium metal bars in a secure vault in London. Priced off the LPPM’s specifications for “Good Delivery,” PALL is one of the few ways that investors can obtain exposure to the metal and invest with minimal credit risk beyond holding a futures contract on palladium. There are no pure palladium miners. The fund has $496.40 million in AUM.
PALL has a 0.60% expense ratio, which is higher than the 0.49% category average. PALL ended Friday’s trading session at $231.17, and is currently trading 34.4% above its $172.06, 52-week low. The ETF has gained 29.7% over the past year and 4.2% over the past six months. Its net inflows were $33.10 million over the past month.
PALL’s strong fundamentals are reflected in its POWR Ratings. The ETF has a B rating for Trade Grade. It is ranked #20 in the same group.
Sprott Junior Gold Miners ETF (SGDJ)
SGDJ seeks to track the performance of its underlying index, the Solactive Junior Gold Miners Custom Factors Index. The index tracks the performance of small capitalization/junior gold companies located in the U.S., Canada and Australia, whose stocks are listed on regulated exchanges. The fund invests at least 90% of its assets in securities that comprise the underlying index. It has $137 million in AUM. SGDJ’s major holdings include Great Bear Resources Ltd., Skeena Resources Limited and Centamin plc.
SGDJ has a 0.50% expense ratio, which is higher than its 0.46% category average. The ETF has a stable environmental, social and government (ESG) outlook. It has a BB MSCI Rating, which is based on a score of 4.02 out of 10. The ETF pays $0.97 in dividends annually, which translates to a 2.2% dividend yield. Its four-year average dividend yield is 0.7%.
SGDJ closed Friday’s trading session at $44.45 and is currently trading just 16.1% below its 52-week high of $52.98. The ETF has gained marginally over the past three months. The ETF’s net inflows amounted to $3.64 million over the past three months.
SGDJ’s POWR Ratings reflect this promising outlook. The ETF has a B rating for Trade Grade. It is ranked #24 in the Precious Metals ETFs group.
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PPLT shares were trading at $99.10 per share on Monday afternoon, up $1.59 (+1.63%). Year-to-date, PPLT has declined -1.62%, versus a 12.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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