Thursday, May 28, 2009
This is part three of a four part series this week that looks at commodity ETFs and ETNs. For the first installment covering index-based products, see this item from Tuesday and, for energy funds, see yesterday's post.
Today, the subject is precious metals and base metals where there is very little of interest going on aside from the "elephant in the living room" in the first row of the table below - the gargantuan (and still growing) assets for the SPDR Gold Shares ETF (NYSEArca:GLD).
[Note: All year-to-date gains/losses are based on the May 22nd market close (last Friday) and the commodity offerings are listed in the order that they became available.]
The $31.4 billion gold ETF (an even $36.0 billion according to the SPDR website as this is written) dwarfs every other commodity fund and stands as the second largest ETF offering of any kind, behind only the SPDR S&P500 ETF (NYSEArca:SPY) at about double the size.
My how the world has changed over the last few years.
Trading volume remains quite heavy at about 17 million shares a day, well short of the the wildly popular PowerShares DB Crude Oil Double Long ETN (NYSEArca:DXO) as noted yesterday, but impressive nonetheless.
Like other gold funds, GLD isn't having much trouble tracking its underlying commodity, this collection of ETFs and ETNs being downright boring compared to the contango-driven problems in energy funds discussed yesterday. As of last Friday, gold was up 8.4 percent for the year and the U.S.-based funds that track it - even the inverse and leveraged funds - were all within about one percentage point.
• SPDR Gold Shares ETF (NYSEArca:GLD): +8.8%
• iShares COMEX Gold Trust ETF (NYSEArca:IAU): +8.6%
• PowerShares DB Gold Fund ETF (NYSEArca:DGL): +7.7%
• Deutsche Bank Gold Short ETN (NYSEArca:DGZ): -8.8%
• Deutsche Bank Gold Double Short ETN (NYSEArca:DZZ): -17.8%
• Deutsche Bank Gold Double Long ETN (NYSEArca:DGP): +16.9%
• E-TRACS Bloomberg CMCI Gold Total Return ETN (NYSEArca:UBG): +8.1%
About the only item of note regarding the group above is that the double long ETN trades over two million shares a day these days, far more than every other offering save for the giant gold and silver ETFs.
And, speaking of silver, it's pretty much the same story there with all three funds doing pretty much what they're supposed to do, one of them even doing better than the 31 percent gain in the price of silver as of a few days ago (about 35 percent as of today - very impressive).
• iShares Silver Trust ETF (NYSEArca:SLV): +29.5%
• PowerShares DB Silver ETF (NYSEArca:DBS): +29.0%
• E-TRACS Bloomberg CMCI Silver Total Return ETN (NYSEArca:USV): +35.5%
Those E-TRACS funds seem to be outperforming their competition almost across the board. Their energy ETNs have suffered least from contango and, while the gold offering above lagged a bit, it was more than made up for in their silver product.
The only combo fund - PowerShares DB Precious Metals Fund ETF (NYSEArca:DPB) - is also doing about what it's supposed to do, up 11.5 percent, slightly behind what you'd get for its 80/20 percent weighting of gold/silver.
Rounding out the precious metals group are the three platinum ETNs, the two long funds trailing the underlying metal's 25 percent gain by four or five percentage points and the very thinly traded short fund being quite kind to investors, posting a loss less than half the metal's gain.
• E-TRACS UBS Bloomberg Long Platinum ETN (NYSEArca:PTM): +21.1%
• E-TRACS UBS Bloomberg Short Platinum ETN (NYSEArca:PTD): -10.0%
• iPath DJ-AIG Platinum Total Return ETN (NYSEArca:PGM): +20.3%
There are six commodity offerings that hold a group of base metals - mostly just copper, aluminum, and zinc though the Rogers fund is broader - and most are just a few percentage points below the combined gain of 24 percent for these metals (i.e., copper up 50.0%, aluminum down 4.7%, and zinc up 26.9%) which is quite reasonable.
• PowerShares DB Base Metals Fund ETF (NYSEArca:DBB): +21.0%
• ELEMENTS Rogers Intnl Commodity Metal ETN (NYSEArca:RJZ): +20.8%
• iPath DJ-AIG Industrial Metals Total Return ETN (NYSEArca:JJM): +16.1%
• E-TRACS Bloomberg CMCI Industrial Metals ETN (NYSEArca:UBM): +21.3%
• PowerShares DB Base Metals Double Long ETN (NYSEArca:BDD): +38.3%
• PowerShares DB Base Metals Double Short ETN (NYSEArca:BOM): -36.5%
Once again, the iPath ETN is the laggard and the leveraged funds don't quite provide double the year-to-date loss or gain as many investors might think.
Finally, there are six ETNs (all from iPath) that track individual base metals, and they all trail the metal prices by anywhere from one percentage point for copper to 12 percentage points for lead. Contango most likely is explains the differences here.
• iPath DJ-AIG Copper Total Return ETN (NYSEArca:JJC): +49.2%
• iPath DJ-AIG Nickel Total Return ETN (NYSEArca:JJN): +6.6%
• iPath DJ-AIG Tin Total Return ETN (NYSEArca:JJT): +31.3%
• iPath DJ-AIG Aluminum Total Return ETN (NYSEArca:JJU): -10.3%
• iPath DJ-AIG Lead Total Return ETN (NYSEArca:LD): +36.3%
Of all the base metal offerings, the original PowerShares ETF is, by far, the most popular, its nearly half million shares a day in trading volume more than double the combined total for the other ten. As is usually the case, the first to market gets the lion's share of the investor money and, in the world of base metal ETFs and ETNs, it is a relative granddaddy at almost two-and-a-half years old.
It should come as no surprise that the bulk of investor money and trading volume in metals are in gold and silver as nearly everybody knows what these metals are, even if they may not fully appreciate their historical role as money up until a few decades ago.
In fact, in the scheme of things, it seems kind of funny that there are gold and silver investment products at all. Someone in a decades-long coma might wake up and look at these offerings and scratch their heads wondering why people are using paper money to buy real money through paper certificates.
As noted on many occasions in the past, ETFs are a very convenient way to own metals but, whenever possible, individuals would be well advised to take physical possession of the metal up until storage becomes a problem.
You can really only be sure of what you've purchased if you can hold it in your hand.
Next up: Agriculture (maybe tomorrow, if not, sometime next week).