Precious metals have softened since March due to rising interest rates and a strong greenback, which have outweighed inflation. Although the market is expected to face some headwinds in the near term, the ongoing geopolitical crisis in eastern Europe and inflation remaining persistently high might bolster the market.
Despite being weighed down by soft demand, gold has shown resilience on the backs of robust Central Bank purchases. Gold prices are expected to end the year at around $1,800 an ounce. Carsten Fritsch, the precious metals analyst at Commerzbank, believes that the ending of the Fed’s rate hike cycle could boost the yellow metal.
Hence, the gold funds, Pacer iPath Gold Trendpilot ETNs (PBUG) and FT Cboe Vest Gold Tactical Buffer ETF (BGLD), might be solid buys.
On the other hand, silver prices started the week below $19 an ounce. The metal continues to underperform gold as hedge funds appear to be reducing their overall exposure to the precious metal due to ongoing recession fears. TD Securities expects recession fears to weaken global economic growth leading to lower silver demand.
Therefore, we think the silver ETF iShares Silver Trust (SLV) might be best avoided now.
Funds to Buy:
Pacer iPath Gold Trendpilot ETNs (PBUG)
PBUG is designed to provide exposure to the Pacer Barclays Gold Trendpilot Total Return Index. The Index is calculated on a total return basis and is intended to reflect the performance over time by taking 100%, 50%, or 0% notional exposure to the Barclays Gold 3-Month Deferred Index Excess Return and the return that corresponds to the weekly announced interest rate for specified 3-month U.S. Treasury bills.
Over the past year, the fund’s net flows came in at $24.53 thousand. The fund has an expense ratio of 0.65% as compared to the category average of 0.46%. As of August 22, PBUG has a market capitalization of $22.29 million and a closing indicative note value of $22.16.
Over the past month, PBUG has gained 81.4% to close its last trading session at $56.25.
This promising prospect is reflected in PBUG’s POWR Ratings. The fund has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
PBUG has an A grade for Trade and Peer. In the 38-ETF Precious Metals ETFs group, it is ranked #1. Click here to see the additional POWR Rating for Buy & Hold for PBUG.
FT Cboe Vest Gold Tactical Buffer ETF (BGLD)
BGLD invests almost all of its assets in U.S. Treasury securities and shares of a wholly-owned subsidiary that holds FLEX Options that reference the price performance of the SPDR Gold Trust.
As of August 19, BGLD’s top holdings are U.S. Treasury Bill, 0%, due 08/25/2022, with a 98.57% weight, and 2022-08-31 SPDR Gold Trust C 162.58 with a 1.00% weight. As of August 22, BGLD has a $17.67 NAV and $17.67 million in total net assets. The fund has an expense ratio of 0.90%. Its one-year net flows came in at $10.27 million, and three-month net flows stood at $4.45 million.
The fund has declined 1% over the past month to close its last trading session at $17.71.
BGLD has an overall B rating, translating to Buy in our POWR Ratings system. The fund has a Peer grade of A and a Buy & Hold grade of B. It is ranked #2 in the same industry.
In addition to the POWR Rating grades we’ve stated above, one can see BGLD ratings for Trade here.
Fund to Avoid:
iShares Silver Trust (SLV)
SLV aims to reflect the performance of the price of silver before payment of the trust expenses and liabilities and is not actively managed. Additionally, the trust does not engage in any activities to profit or reduce losses caused by silver price changes.
Tracking the LBMA Silver Price ($/ozt) index, SLV had $9.06 billion in net assets as of August 22. It has a NAV of $17.42. The fund has an expense ratio of 0.50% as compared to the category average of 0.46%. Over the past year, the fund’s net flows came in at a negative $1.19 billion. Its net flows stood at a negative $635.36 million over the past month.
The fund has declined 18% over the past year and 18.6% year-to-date to close its last trading session at $17.50. It has declined 5.7% over the past five days. SLV has a five-year monthly beta of 0.92.
SLV’s POWR Ratings reflect this bleak outlook. The fund has an overall D rating, equating to a Sell in our proprietary rating system. SLV has a Trade and Peer grade of D. In the Precious Metals ETFs group, it is ranked #20. The group is rated D.
Click here to see the additional POWR Ratings for SLV (Buy & Hold).
PBUG shares were trading at $63.56 per share on Tuesday morning, up $7.31 (+13.00%). Year-to-date, PBUG has gained 180.70%, versus a -12.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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