As the price of gold hits new all-time highs and silver rallies to a multi-year high, Bank of America has identified four exchange-traded funds (ETFs) that offer attractive exposure to precious metals. The top-rated ETFs include abrdn Physical Silver Shares ETF (ticker SIVR), iShares Silver Trust (SLV), Invesco DB Precious Metals Fund (DBP) and abrdn Physical Precious Metals Basket Shares ETF (GLTR). Bank of America rated all four ETFs “more attractive” in comparison to other ETFs with similar assets. The Wall Street bank also has a “favorable view” rating on the sectors represented by the ETFs. These funds reflect baskets of physical precious metals, with varying allocations to silver, gold, palladium, and platinum. Bank of America’s research also suggests that a portfolio with 40% exposure to broad commodities would have outperformed a portfolio with 40% U.S. Treasury bonds by 0.8% per year since 1945. Despite strong performance since the Covid-19 pandemic, long-term commodity returns are still near all-time lows, according to BofA. Broad commodity indexes returned 20% per year in the 1970s and averaged 5-10% returns during the 1990s to 2000s, but post-global financial crisis returns were the lowest on record since the Great Depression. Bank of America believes that commodities are poised for a reversion to the mean, with its ETF strategist Jared Woodard adding, “commodities are still at all-time lows relative to financial assets, and this ratio would likely move higher in a sustained shift to a 5% world.” abrdn Physical Silver Shares ETF SIVR is the cheapest silver fund in Bank of America’s coverage, with a total expense ratio of 0.50%. Bank of America’s commodity team is also bullish on silver and expects spot prices to end 2024 at $26.46 per ounce and $32.50 per ounce at the end of next year. It was trading at $30.50 per ounce at the end of last week. “The silver market has rebalanced on production discipline and demand from new applications including solar panels,” said BofA’s strategists. @SI.1 1Y line iShares Silver Trust SLV, while larger than SIVR by assets under management, could offer higher liquidity and a lower bid-ask spread for investors prioritizing liquidity, according to Bank of America. SLV SIVR 1Y line Invesco DB Precious Metals Fund DBP, with an 80% allocation to gold and 20% to silver, is also favored by the bank’s commodity team. However, it is also the most expensive ETF among BofA’s picks with a 0.77% total expense ratio. “DBP’s high weight towards gold has contributed to its outperformance relative to GLTR,” said the BofA strategist. abrdn Physical Precious Metals Basket Shares ETF GLTR offers a more diverse exposure, with over 60% in gold, over 20% in silver, and the remaining 10% in platinum and palladium. “The fund is [more than] 60% gold and [more than] 20% silver, and our commodity team is bullish on both,” said BofA. “In our view, weights to palladium and platinum are not large enough to have a material impact.” — CNBC’s Michael Bloom contributed reporting.
