Market Overview

Metal ETFs Sizzled In August

Metal ETFs Sizzled In August

August wasn't a great month for stocks. It was the first month of 2017 the S&P 500 finished lower, but some other asset classes shined. Exchange traded funds dedicated to industrial and precious metals were among last month's most durable performers.

“In August, the Dow Jones Commodity Index Total Return gained 0.7 percent, reducing its year-to-date loss to -1.4 percent, and the S&P GSCI Total Return lost 0.8 percent, increasing its year-to-date loss to -6.9%,” said S&P Dow Jones Indices. “Industrial metals and precious metals were the only positive sectors, up 8.6 percent and 4 percent, respectively.”

Helping metals-related ETFs rise last month was the ongoing slump in the U.S. dollar. The PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP), which serves as an ETF proxy for the U.S. Dollar Index, lost a third of a percent in August. UUP is down 9 percent year-to-date, underscoring the dollar's status as one of this year's worst-performing major currencies.

Gold And Silver

Amid heightened geopolitical concerns, many stemming from North Korea's saber rattling, gold enjoyed a solid run. For example, the SPDR Gold Shares (NYSE: GLD), the world's largest physical gold ETF, climbed 4.3 percent.

Lingering uncertainty about the Trump administration's ability to push through centerpieces of its agenda have also prompted investors to revisit gold ETFs. For the week ended Sept. 1, GLD took in almost $1.1 billion in new assets, good for the second-best total among all ETFs during that period. Gold's surge is trickling down to silver and the related ETFs as the iShares Silver Trust (NYSE: SLV) posted an August gain of 5.4 percent.

“August 2017 was the first August on record that all the metals gained together (since 1995 – the earliest year all seven metals were included in the index,) and it was the first month every metal gained together since Sep. 2016,” said S&P Dow Jones. “As a result, the S&P GSCI All Metals Total Return gained 7.3% in August, posting its best August ever since 1995. Now the all metals index is up 19% year-to-date, and is on pace to have its best year since 2009, and its third best year on record.”

New Highs

At least five industrial metals, including copper, hit new highs in August. The iPath Bloomberg Copper Subindex Total Return ETN (NYSE: JJC) gained more than 8 percent last month and is up 24 percent year-to-date.

The weak dollar continues to loom large for commodities.

“Since commodities are priced in U.S. dollars and industrial metals is one of the most economically sensitive sectors, it moves oppositely from the falling dollar, rising on average 2.3 percent for every 1 percent the dollar drops,” said S&P Dow Jones.

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