LemonTrades
Precious metals ETFs let you own gold, silver, platinum or palladium in an ordinary brokerage account, with no vault and no dealer. They look alike, but the metals inside them behave very differently.
How they work
A physically backed metals ETF buys bars of the metal and stores them in a vault, usually in London, New York or Zurich. Each share is a slice of that metal, so the price follows the metal’s price, minus the fund’s yearly fee. Big trading firms create and redeem shares to keep the price close to the value of the metal. The mechanics are the same as for gold; see how gold ETFs work.
The metals behave differently
- Gold is mostly a store of value. It reacts to interest rates, the dollar, central bank buying and fear, and is the calmest of the four.
- Silver is half precious metal, half industrial metal: solar panels and electronics use most of it. It usually follows gold, but with bigger swings. See our live silver price and outlook.
- Platinum goes into car exhaust catalysts, jewelry and industry, and much of it is mined in South Africa, so supply problems there move it.
- Palladium is used mainly in catalysts for gasoline cars, with most supply from Russia and South Africa. It’s the most volatile of the four, and can swing on car sales and sanctions.
Other kinds of metals ETFs
- Basket ETFs like GLTR hold several metals in one fund.
- Mining ETFs like GDX (gold) hold companies, not metal. They usually move more than the metal and can pay dividends.
- Futures-based funds hold futures contracts, which roll every month and can drift from the spot price.
- Leveraged and inverse ETFs reset daily and are meant for short-term trading.
Costs and taxes
Fees range from about 0.10% a year for the cheapest gold funds to 0.60% for platinum, palladium and basket funds. In the US, gains on physically backed metals ETFs are taxed as collectibles: long-term gains at up to 28%, not the usual 15% or 20% for stocks. Short-term gains are taxed as ordinary income. Holding them in an IRA changes this. Check with a tax professional.
How to choose
- Pick the metal for its job: gold for stability, silver or platinum for more industrial exposure, a basket to spread it out.
- Check that it holds physical metal, if that’s what you want.
- Compare fees and trading volume. Smaller funds can have wider spreads.
- Size it for the swings. Silver and palladium can move 20% in a month.
Just looking for gold? See the best gold ETFs, compared.
Education, not financial advice. We don’t recommend any fund or get paid by any issuer. ETFs can lose value. See our disclaimer.
