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While the 2010 gold rush is making a lot of headlines, it’s important to not overlook other hard assets [such as silver, copper, platinum, palladium and rare earth metals] that are good investment alternatives to gold and have all rallied to fresh highs recently as well. While each of these offers its own strengths and weaknesses they are ways to diversify your holdings away from gold if you are worried about a crash. Words: 1561
So says* Jeff Reeves (InvestorPlace.com)
Let’s consider each gold alternative in turn:
Gold Alternative #1: Platinum
a) Appeal:
i) Platinum comes in bars and coins just like gold and silver — and since it’s one of the most valuable metals per ounce, you won’t have to worry about spatial limitations when stowing Armageddon funds in your safe or bunker.
ii) For those of you with a less catastrophic outlook looking for a good long-term investment, platinum has the added appeal of industrial applications (including catalytic converters for automobiles) as well as luxury items like jewelry so if and when consumers start spending again, platinum will see a spike in demand.
b) Recent performance:
Platinum quadrupled from 2001 to early 2008, from around $50 an ounce to a brief high of almost $2,300 but as the market melted down in the wake of Lehman Brothers’s failure, platinum did too — falling about 65% in nine months. The metal has been bouncing back dramatically since a brief low of less than $800 in December 2008, however, and has a current price north of $1,600 an ounce.
c) How to buy:
i) Platinum coins and bars can be a good alternative to gold as a tangible investment, bought through reliable dealers of course.
ii) There are also ETF trusts [such as] the ETFS Physical Platinum Shares (CONSOLIDATED:PPLT)… [and a] few pure platinum miners [but] they tend to be illiquid and OTC such as the South African Anglo Platinum Limited (PINK:AGPPY).
Gold Alternative #2: Palladium
a) Appeal:
i) Palladium comes in coins and bars if you’re so inclined.
ii) The metal doesn’t quite have the “street cred” of gold, platinum or silver, and is an unlikely currency if the dollar disappears, even if it’s quite valuable. [Nevertheless,] palladium’s appeal as a typical commodity investment is obvious, as the element is found in electronics from computers to smart phones to LCD televisions and if and when electronics sales heat up… there could be the low supply and high demand that is a hallmark of any good commodity play.
b) Recent performance:
Palladium was “discovered” during the dot-com boom, racing up from around $100 an ounce to over $1,000 an ounce in five years. Then it flopped to around $200 per once as the tech bubble burst. Palladium is now trading above $550 an ounce — up almost 40% from lows in early 2010 — and could be poised for more gains.
c) How to buy:
i) ETF Securities offers a pure palladium fund akin to its gold, silver and platinum offerings — the ETFS Physical Palladium Shares (CONSOLIDATED:PALL).
ii) There are also a handful of primarily palladium miners including North American Palladium Ltd. (CONSOLIDATED:PAL) which is up 40% in the last three months and is significantly outperforming the market year-to-date.
iii) There are also a [number] of diversified miners such as Stillwater Mining Company (NYSE:SWC), whose stock is up an impressive 72% so far in 2010.
Gold Alternative #3: Silver
a) Appeal:
i) Silver has tracked gold pretty closely, tripling in the last five years and quadrupling in the last decade just like the yellow stuff. The metals do not move in lockstep, [however,] and that provides investors an opportunity to diversify and protect against shocks in the gold market.
ii) [Also,] for all you investors preparing for the apocalypse, physical silver has actual currency potential if you truly believe the dollar will become worthless. After all, how do you buy inexpensive essentials like food or clothes with a gold bar worth thousands or a gold coin worth hundreds?
b) Recent performance:
Silver traded under $7 an ounce just five years ago but the metal has tripled in value since 2005. Silver is now near a 30-year high of around $22 an ounce, and may climb 20% or more in the next year, according to a recent Deutsche Bank report.
c) How to buy:
i) Like gold, silver has trust ETFs such as the iShares Silver Trust ETF (CONSOLIDATED:SLV) and the smaller ETFS Silver Trust (CONSOLIDATED:SIVR) that are pure plays on silver.
ii) There are also a few mainly silver miners such as Pan American Silver Corp. (NASDAQ:PAAS) , up 25% YTD; Silvercorp Metals Inc. (NYSE:SVM) , up 28% YTD; and Mag Silver Corp. (CONSOLIDATED:MVG) , up 33% YTD.
iii) [Then there is the royalty company, i.e. a non-miner that contracts to buy secondary silver production from other mining producers at a fixed price, by the name of] Silver Wheaton Corp. (NYSE:SLW), which is up about 80% year-to-date and about 520% in the last five years.
iv) Of course, if you’re looking less for an investment and more of a hedge against chaos, you can stock up on silver bars and coins to store beside your gold stockpile.
Gold Alternative #4: Rare Earth Metals
a) Appeal:
These are the elements of the 21st century, used in space-age gear from lasers to superconductors to X-ray machines. If you believe in a high tech future, you should believe in rare earths as a good long-term investment.
b) Recent performance:
There’s no easy index or futures market for rare earths, since the category includes over a dozen different elements. From a demand view, consider that 10 years ago the world used 40,000 metric tons of rare earth metals a year and today the world uses 125,000 tons — and that is expected to grow to over 200,000 tons by 2014.
c) How to buy:
Though the potential seems great for rare earths, there are very few practical ways to invest in this commodity. Perhaps the best examples are:
i) Rare Element Resources Ltd (CONSOLIDATED:REE) with a market cap of $250 million and Molycorp Inc. (NYSE:MCP) with a market size of about $2 billion. Both trade on legitimate U.S. exchanges — and both have tallied dramatic returns in 2010 of more 100%!
ii) There are also pink sheet, foreign and micro-cap stocks that are pure plays — including Rare Earth Metals (PINK:RAREF) that mines in Canada.
iii) For a more diversified play on rare earths, you can always consider the mining majors that have a stake in rare earths as well as conventional metals [such as] Aluminum Corp of China (NYSE:ACH) that just recently announced plans to take a majority stake in two China rare earth metals companies totaling at least $1.5 billion.
Gold Alternative #5 – Copper
a) Appeal:
The great upside to copper is in fact its affordability — and subsequent liquidity. Copper is flexible, cheap and a good conductor of electricity so you can find it in everything from sophisticated electronics to the pipes and wires in your home. Any industrial recovery simply can’t happen without copper — and unless we all go back to farming goats, the metal will remain in demand even during weak economic times.
b) Recent performance:
Earlier this year, copper prices fell 25% after a dramatic 2009 rally, thanks to fears of a double-dip recession but the commodity has leaped back up to over $7,700 a ton on the London Metals Exchange and is approaching a two-year high. That high was an all-time peak set at the height of the market in 2008, by the way, so if copper pushes through that it will be in record territory.
c) How to buy:
i) The iPath Copper Trust (CONSOLIDATED:JJC) is a pure play on copper prices. Thanks to the recent rebound, the fund is up 27% in the last three months.
ii) Another alternative is to get slightly more diversified, through the PowerShares DB Base Metals ETF (CONSOLIDATED:DBB), which is divided evenly between copper, aluminum and zinc. DBB is up a comparable 23% in the last three months.
iii) There is also the iShares Chile ETF (CONSOLIDATED:ECH), which has huge copper exposure since 50% of Chile’s exports are copper. The ECH Chile ETF is up a very nice 28% in the last three months and 35% so far in 2010, based on coppers resurgence and the booming emerging market’s growth.
iv) Then, of course, you have no shortage of copper miners including blue chips Southern Copper (NYSE:SCCO), Freeport McMoRan (NYSE:FCX) and Teck Resources (NYSE:TCK), among others.
Conclusion
[There you have it. Now you know better than to overlook other hard assets such as silver, copper, platinum, palladium and rare earth metals] that are good investment alternatives… to diversify your holdings away from gold if you are worried about a crash.
*http://www.marketwatch.com/story/story/print?guid=D78131DC-D2E9-11DF-8158-00212804637C