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Precious Metal Mining ETFs Head To Head: GDX Vs. SIL

Precious metals such as gold and silver are enjoying a reprieve these days, thanks to the weak September U.S. job data that has dented the possibility of an interest rate hike later this month or may be this year, which could have been the first in nearly a decade. Both the yellow and white metals were out of investors’ radar for most of the time this year. The blame goes largely to the prospect of an interest rate hike this year, a strengthening dollar, muted inflation across most developed nations and slowdown in key consuming countries like China. At London Gold Fixing , both gold and silver were down 9.2% and 12.4%, respectively, in the year-to-date time frame. However, the below par jobs’ report has raised questions over the health of the U.S. economy and the fate of the looming Fed policy tightening. Headline job gains for September came in at 142,000 versus estimates of 200,000 and the prior month’s tally of 136,000. The weak U.S. data has also disturbed the case of a stronger dollar. The Wall Street Journal Dollar Index , which measures the greenback against a group of 16 widely traded currencies, fell 0.6% to its two-week low of 87.96 yesterday. These factors are compelling investors to turn their focus on precious metals as a store of wealth and a hedge against market turmoil. Both the metals are regaining its luster lately. Yesterday, spot gold reached its highest level of $1,151.20 per ounce in nearly two weeks (since September 24), while silver touched its highest level of $16.08 per ounce in more than three months. However, if both the metals are compared head to head, the outlook for gold is stronger than silver. This is because gold has greater storage value than silver and a lift-up in Fed rates that seemed imminent before the jobs report seems unlikely in the near future. According to CME Group’s FedWatch program , traders are playing on a 31% chance of a rate hike this December, down from 44% before the release of the weak jobs data. Therefore, the yellow metal definitely has a stronger case given the prevailing near-zero interest rates, lowering the opportunity cost of holding the metal, and weakening dollar, which is the key to gold’s movement. On the other hand, silver is used in a number of key industrial applications. But the demand for silver as an industrial metal doesn’t look that good given global growth worries and decline in manufacturing activity across the world driven by the persistent decline in oil prices, slowdown in China, and continued weakness in Euro zone and Japan. In this scenario, it would be intriguing to look at two top performing gold and silver ETFs and their key differences. Market Vectors Gold Miners ETF (NYSEARCA: GDX ) This ETF tracks the price and yield performance of the NYSE Arca Gold Miners Index, which provides exposure to publicly-traded companies worldwide involved primarily in gold mining. The fund holds 36 stocks in its basket. Goldcorp Inc. (NYSE: GG ), Newmont Mining Corporation (NYSE: NEM ) and Newcrest Mining Limited ( OTCPK:NCMGY ) occupy the top three positions in the basket with shares of 7.5%, 6.1% and 5.6%, respectively. Canadian firms dominate the fund’s portfolio with a 52% share, followed by U.S. (15.5%) and Australia (10%). The product has amassed over $5 billion in its asset base and trades in solid volume of around 48 million shares a day. It charges investors 53 bps in fees per year. The fund shed around 14.7% so far this year but was up 15.6% in the past one month (as of Oct 6, 2015). Global X Silver Miners ETF (NYSEARCA: SIL ) This ETF follows the price and yield performance of the Solactive Global Silver Miners Index, measuring the performance of the silver mining industry. The fund holds 24 stocks in its basket. Industrias Penoles Cp, Silver Wheaton Corp. (NYSE: SLW ) and Silver Standard Resources Inc. (NASDAQ: SSRI ) are the top three holdings in the fund with allocations of 11%, 10.6% and 7.9%, respectively. The ETF is also highly focused on Canadian firms with a 58% share, followed by U.S. (12.3%) and Mexico (11.1%). SIL has gathered $146 million in assets and charges 65 bps in fees. It trades in an average volume of more than 231,000 shares. The product was down 20.1% in the year-to-date period but was up 13.7% over the last one month. Both GDX and SIL look like a pure play on the precious metal market. However, GDX is notably cheaper and has much higher liquidity than SIL. Further, GDX focuses on top mining companies and fared well in terms of price performance compared to SIL. Finally, GDX seems a better option to ride on the comparatively bullish outlook of gold vis-à-vis silver. Original Post

Is Sugar The Best Commodity ETF Right Now?

2015 has been a bad year for both soft and hard commodities. Notably, S&P GSCI Total Return – the benchmark for commodity market performance – nosedived about 19.3% in the third quarter, representing the fifth worst quarter and the third worst third quarter since 1970. With this, the index is on the verge of recording the sixth worst year after 2008. The blame is largely heaped on the stronger dollar, global growth worries, plunging oil prices and weakening demand that have dampened the appeal for commodities. Economic slowdown in China is a major setback for the commodities market, as the world’s second-largest economy is also the world’s largest buyer of raw materials. However, there seems to be a torchbearer in this commodity market blackout. This is sugar, as its price has recovered as much as 30% since touching its seven-year nadir on August 24. Last week, sugar was the only commodity (except steel) that registered a double-digit rise of around 10%. The upsurge was mainly driven by the appreciation of the Brazilian real against the U.S. dollar, and Brazil’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a weaker dollar discourages sugar exports from the country, lifting up its prices in the world market. Shortage of production is another issue that is playing on the bullish trend in sugar prices. As per International Sugar Organization , sugar cane processed this season in Brazil declined 2.1% to 412,624 million tons, while sugar output in the country is down 11% from the prior year, as mills are converting more cane to ethanol in response to a possible hike in gasoline prices. India, the world’s second-largest sugar producer, is also expected to experience a 5% fall in sugar output to 28.3 million tons in 2015, as per Indian Sugar Mills Association, thanks to the El Nino weather condition that is causing insufficient rainfall in the region. According to a note by Morgan Stanley, sugar consumption is expected to exceed demand for the first time in six years. The firm expects consumption to outdo demand by 3.7 million metric tons in the marketing year that began on October 1. Riding on the bullish trend in sugar prices, ETFs that are exposed to this soft commodity have been experiencing handsome gains (some double digits as well) over the past one month. Below, we highlight three of those ETFs that investors should definitely consider in this otherwise bearish commodity market (see all Agricultural ETFs here ). iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are seen in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $56 million in assets, and trades in a daily volume of 48,000 shares, on average. It charges 75 bps in annual fees. The note was up 15.2% in the past one month, and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. Teucrium Sugar Fund (NYSEARCA: CANE ) This ETF tracks the Sugar Futures index, which reflects the daily changes of a weighted average of the closing prices for three futures contracts for sugar that are traded on ICE Futures US. The fund is nearly overlooked, as it has gathered nearly $4 million in assets and trades in a paltry volume of around 5,000 shares. However, the ETF is expensive, charging a hefty 176 bps in fees from investors per year. It was up 9.8% over the last one month, and carries a Zacks ETF Rank #3 with a High risk outlook. iPath Pure Beta Sugar ETN (NYSEARCA: SGAR ) This is another sugar ETN by iPath, and follows the Barclays Capital Sugar Pure Beta TR Index. The index consists of a single futures contract, but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. SGAR is also neglected, with only $1.4 million in AUM, and is thinly traded, with average volume of nearly 2,000 shares. The note charges 75 bps in annual fees, and was up 12.5% in the past one month. It also carries a Zacks ETF Rank #3 with a High risk outlook. Original Post