By Gerrard Cowan
It has been a golden year for precious-metal ETFs.
This year’s top 10 nonleveraged ETFs by returns through July are focused on gold and silver, with all of them up at least 100% since the start of 2016, according to data from ETFdb.com, a site that provides information and analysis of the market. (Nonleveraged funds don’t use derivatives or borrowed money as part of their investment strategy.)
The funds take varying approaches, but they invest in mining companies. The top spot is held by PureFunds ISE Junior Silver (SILJ), which rose more than 250% through July. At the beginning of the year, it had assets under management of about $3.5 million, according to PureFunds Chief Executive Andrew Chanin, meaning the fund was costing more to run than it was generating in revenue. Its assets now exceed $91 million.
“It’s been a wild year,” says Mr. Chanin. “There were people who were trying to advise me to close the fund down last year. I had absolutely no interest in seeing that happen.”
The success of the mining ETFs is directly linked with the rise of gold and silver prices, which have bounced back strongly after a multiyear bear run. Gold is up 27% this year, and silver 44%.
There are a number of reasons for this resurgence. First, investors see the metals—particularly gold—as a safe-haven asset in volatile financial markets, says Jay Jacobs, director of research at Global X, which runs the Gold Explorers (GLDX) and Silver Miners (SIL) ETFs. He points to volatility in the early part of the year when oil prices fell below $30 a barrel, and in June following the U.K.’s vote to leave the European Union.