The Bank of England cut interest rates to a record low of 0.25%, the first time it has cut rates in seven years. Maxwell Gold, director of investment strategy at ETF Securities, said the stimulus will help boost precious metals across the board, but the biggest knee-jerk reaction will be seen in gold and silver due to their historical monetary usage.
'These diverging monetary policies are adding continued volatility on the global front and we see this as a really opportunistic macro environment to add to precious metals to help dampen volatility and to help manage risk across asset allocations,' said Gold.
Gold said investors seeking to spread out their precious metal exposure beyond gold and silver should consider the ETF Securities Physical Precious Metals Basket Shares (GLTR) - Get Report . The ETF, up 33% thus far in 2016, tracks the spot prices of a basket of gold, silver, platinum and palladium, less holding costs, using bullion held in London and Zurich. The fund, which has an expense ratio of 60 basis points, currently has $247 million in assets.
Silver is up 47% thus far in 2016, leading the entire precious metals asset class. And while silver has industrial uses, Gold said the metals outperformance this year is primarily due to its 'safe haven, store of value' attributes.
'Investment managers want to hold silver in this negative interest rate, low-inflation environment,' said Gold.
Palladium (PALL) - Get Report and Platinum (PPLT) - Get Report are up 26% and 29% respectively, in line with gold's rise of 28%. Platinum and palladium are also industrial metals with their most prominent use as components in catalytic converters for automobiles. Sales for the top three auto makers selling in the U.S. slipped in July, but Gold is not worried about a short term problem in Detroit affecting palladium and platinum prices over the long term.
'Physical deficits are coming into the forefront of investors' interest as well as broader demand for gold and silver and other safe haven assets has picked up investment demand primarily in the futures markets,' said Gold, adding that the Chinese auto market continues to be robust.