Heavy metal thunder!
Terrified investors are flocking to gold. But that’s not the only precious metal that they are scooping up.
Silver prices have surged 13% so far this year. Shares of miner Silver Wheaton are up nearly 20%.
Platinum has gained more than 6%. And palladium is up 12% since mid-January.
There are also some pretty wacky funds that are soaring along with these metals.
Look at the Direxion Daily Gold Miners Bull 3X ETF and VelocityShares 3x Long Silver ETN, for example.
These are funds designed for day traders, not long-term investors. They invest in derivatives and other arcane securities that allow them to outperform the price of the metal they’re tracking by a certain amount.
Any fund with 3X in the name is hoping to go up three times as much on any given day, for example. So they are extremely volatile. When gold and silver go down, these funds tend to go down three times as much.
But with gold and silver soaring this year, these funds have been extremely profitable bets for anybody lucky (or crazy) enough to buy and hold them.
The Direxion Daily Gold Miners Bull 3X ETF has more than doubled in a little more than a month. That’s what Netflix and Amazon did for all of last year.
And the VelocityShares 3X Long Silver ETN is up 43% so far in 2016.
This is a clear sign that investors are EXTREMELY nervous.
Precious metals tend to do well during times of financial stress. Google “gold fear” and you get about 142 million results. That’s 7 million more than what you get by searching for “Beyonce Super Bowl!”
There is the perception that gold and silver will always have some sort of intrinsic value … unlike a paper currency. They are somewhat rare.
And that’s why these metals are categorized as precious. (Are you thinking of Sméagol/Gollum from “The Hobbit” and “The Lord of the Rings” like I now am? No? Well, I am a nerd.)
Sure, gold, silver and platinum do have some industrial uses … so some people are buying and selling them based on expectations for actual demand.
But other metals that are more widely used by businesses — such as copper, aluminum and nickel — are all down this year.
And global mining giants like Anglo American, Glencore, Rio Tinto and BHP Billiton are getting crushed as a result.
So as long as investors remain nervous about oil, China, interest rates and well, pretty much everything, then there’s a good chance that gold, sliver and platinum will continue to shine in a market that has otherwise lost its luster.