ETF Update: Gold, Metals ETFs, Potash

Gold ETF Making History

The largest gold ETF has been a real trailblazer lately.

The SPDR Gold Trust (GLD) is the most actively traded call option on the Chicago Board Options Exchange, reports Sophia Grene for the Financial Times. The news is remarkable because it’s only been a month since the options began trading.

The decision to allow options on the fund involved resolving some jurisdictional issues between the Securities and Exchange Commission [SEC] and the Commodity Futures Trading Commission [CFTC], since the SEC oversees funds, while the CFTC oversees commodities - which are within the fund.

The two agencies finally came to an agreement and established a permanent regulatory liaison between them.

Last week, GLD was also listed on the Tokyo stock exchange, where it became the first physically-backed commodity ETF listed.

The gold in the fund is held in the London vaults of HSBC Bank USA. The fund is up 10.8% year-to-date.

Gold, Silver, Platinum, Palladium ETFs - Oh, My!

Platinum and palladium ETFs are reflecting the love investors have for metals that do much more than look pretty.

Platinum demand is being driven, literally, by its primary use as a catalyst in devices that remove automotive pollutants, says Carolyn Cui for the Wall Street Journal. Thanks to tightening emissions standards and a growing global auto population, demand for the metal has risen 8.6%.

Factor in the personnel, production and equipment woes of mining companies already struggling to keep up with demand, and you’ve got rising prices. South Africa’s electricity outages earlier this year also pushed the price of metals, including gold and platinum, to new highs. Platinum is 12% off its high.

Since ETFs that hold physical platinum were launched by London’s ETF Securities last year, the price of platinum has risen 52% and palladium is up 20%.

Fund companies looking to harness that growth have been launching a number of new products this year, including:

• iPath Dow Jones-AIG Platinum (PGM): Launched on June 24
• E-TRACS UBS Long Platinum (PTM): Launched on May 9
• E-TRACS UBS Short Platinum (PTD): Launched on May 9
• ELEMENTS MLCX Precious Metals (PMY): Launched on April 4; holds 32% platinum; 52% gold; 8% silver and 8% palladium

But unlike ETFs for platinum, the ETNs don’t hold the metal, which leaves the market unaffected. Instead, they buy or sell contracts in the futures market to replicate price movements.

Some have noted that demand for platinum has been tapering off, driven lower by the high prices. For years now, automakers have been replacing platinum with palladium, which isn’t as pricey.

Some automakers are looking to go even cheaper than that, as one mining company has developed a catalyst that uses silver for diesel-fueled engines.

Other ways to access precious metals include:

• iShares Silver Trust (SLV), up 20.2% year-to-date
• PowerShares DB Precious Metals (DBP), up 10.5% year-to-date
• SPDR Gold Shares (GLD), up 10.2% year-to-date

Potash’s Positive Fundamentals Fertilize Agribusiness ETF

It’s been a nice day for both potash producers and agricultural ETFs.

A Goldman Sachs analyst said prices for the fertilizer are rising as a result of global demand and limited availability, since few countries produce it, reports the Associated Press. Farmers want to maximize their yield and profit, and the analyst says it’s all pointing to positive fundamentals. In North America, prices have shot up 45.9% year-to-date.

The top potash-producing countries are Canada (32%), Russia (31%) and Western Europe (19%).

The strongest consumers of potash are the BRIC countries (Brazil, Russia, India, China), which account for 43% of the global potash market, and demand is growing at 5% per year. Prices could double over the next two to three years as food demand increases, too, reports Theresa Tang for Bloomberg.

Potash is an impure form of potassium carbonate, and has been used since the 1300s in the manufacture of glass and soap, and as a fertilizer. Fertilizers that contain it improve crop yield by assisting plants in absorbing nitrogen and using water and sunlight more efficiently. It also helps plants fight insects and disease.

Companies highly tied to potash include Mosaic (MOS), Agrium (AGU), Intrepid Potash and Potash Corp. (POT).

Market Vectors Global Agribusiness (MOO) traded higher today, based largely on the analyst’s forecast, as the fund’s top two holdings are potash companies: Mosaic is 8.1%, while Potash Corp. is 8.4%. MOO is down 2.1% year-to-date.