Precious Metal ETFs Gain From Tit-for-Tat Tariff Action

U.S.-China trade tensions escalated after China retaliated against the latest U.S. actions on Aug 23. It levied a round of retaliatory tariffs on U.S. goods worth $75 billion, which is set to be enacted on Sep 1. The tariffs will be in the range of 5% to 10%.

Investors should note that the latest move by China is in retaliation to the U.S. government’s Aug 1 announcement of levying a 10% tariff on $300 billion worth of Chinese goods. Though Washington delayed some of the tariffs in the Aug 13 announcement, planning the tariff enactment in two tranches: on Sep 1 and Dec 15, China reacted to it nevertheless.

After markets closed in the United States on Aug 23, Trump said “he would raise tariffs on $250 billion in Chinese exports to 30% from 25% in October, and that the tariffs kicking in next week will now be 15%, rather than 10%.” The first lot of those tariffs will be introduced in September (read: Consumer ETFs in Focus on Fresh Tariff Threats).

Trump also tweeted that he "ordered" U.S. companies with business dependence on China to "immediately start looking for an alternative," per an article published on CNN.

Precious Metals: True Gainers

The tariff-related moves and countermoves have shaken the world of investing. Stocks slumped and volatility levels spiked. SPDR S&P 500 ETF (NYSE:SPY) (ASX:SPY) (down 2.6%), SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (TSXV:DIA) (down 2.4%) and Invesco QQQ Trust QQQ (down 3.2%) — all lost heavily on Aug 23. Volatility product iPath Series B S&P 500 VIX Short-Term Futures ETN VXX added about 12.5% on Aug 23. Safe-haven assets and precious metals like gold and silver rallied owing to a plunge in bond yields.

As of Aug 23, 2019, yield on the benchmark U.S. treasuries was 1.52% versus 2.66% recorded at the start of the year. As a result, assets like gold, which is non-interest-bearing, are getting benefited. The Fed’s dovish stance has also been bolstering precious metals like gold and silver (read: Gold ETF Inflows Hits 6-Year High: How to Go Long).

According to the World Gold Council, investors pumped $2.6 billion into gold bullion-backed ETFs in July, raising their collective holdings to 2,600 tons, the highest since March 2013, per Wall Street Journal reports.

The biggest gold ETFSPDR Gold Shares (NYSE:GLD) ( (TSXV:GLD) ) is up 18.9% this year. The biggest silver bullion fund iShares Silver Trust (NYSE:SLV) SLV has also increased 12.6%. Since July, GLD has attracted about $1.35 billion in assets.

ETFs in Focus

Against this backdrop, we highlight a few gold and silver ETFs that have gained on Aug 23 against a broader market slump.

iShares Silver Trust (SLV) — Up 2.4%on Aug 23

Physical Silver ( (KL:SIVR) ) — Up 2.4%

Invesco DB Silver Fund (DBS) — Up 2.2%

Invesco DB Gold Fund ( (NZ:DGL) ) — Up 2.1%

VanEck Merk Gold Trust (OUNZ) — Up 2.1%

Aberdeen Standard Physical Swiss Gold Shares ETF (SGOL) — Up 2.0%

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