Market Barometer

ETFs act as market indicator for precious metals, ensuring improved transparency.

- Ilan Solomons

Precious metals exchange-traded funds (ETFs) have evolved substantially from being the new kids on the metals investment scene. ETFs now act as a market barometer for underlying investor demand and a potential window into future metal demand and prices, says banking group Standard Bank Corporate & Investment Banking Wealth head Johann Erasmus.

He adds that, while, historically, precious metals were considered a relatively opaque commodity sector, the advent of ETFs has provided a viewable indicator of underlying price and volume demand.

“ETFs are used to track and predict broader industry changes and developments, parti cularly in the gold, platinum, palladium and rhodium industries. Using ETFs as a barometer to better understand, for example, the platinum group metals (PGMs) sector has worked extremely well,” Erasmus states.

He notes that, currently, the US dollar prices of gold, platinum, palladium and rhodium are rising and, as expected, trading volumes of gold, platinum and rhodium ETFs are slowly increasing in line with the price increases, as investors become more active in executing their views for the underlying metals future price movements.