GLTR - GLTR: Precious Metals Should Continue To Shine In 2024 (Rating Upgrade)

2024-01-02 13:45:28 ET

Summary

• Gold reached new record highs in 2023, while silver prices only saw a marginal increase.
• Platinum and palladium prices declined, with palladium dropping over 35%.
• The precious metals market is expected to have a bullish year in 2024, supported by a soft landing in the economy and geopolitical uncertainties.
• abrdn Physical Precious Metals Basket Shares ETF is the fund that holds a basket of gold, silver, platinum, and palladium with a concentration in gold and silver.

While silver prices edged only modestly higher in 2023, gold posted a double-digit percentage gain. The golden bull market that began in 1999 continued to take the yellow metal to new record highs in the year that ended last week.

Meanwhile, platinum and palladium, the rare industrial and precious metals, declined, with palladium dropping more than 35%. Palladium had reached a record peak in 2022, but the price ran out of upside steam, falling to under one-third of the price at the high at the 2023 low.

As the precious metals market heads into 2024, gold’s bull market will celebrate its twenty-fifth anniversary as the pattern of higher lows and higher highs remains firmly intact. As markets reflect the economic and geopolitical landscapes, 2024 could be a golden year for the four precious metals. The abrdn Physical Precious Metals Basket Shares ETF ( GLTR ) owns physical gold, silver, palladium, and platinum and could be a precious addition to portfolios for 2024.

A bullish year for the gold market - Silver was marginally higher

Gold reached new record highs in 2020-2022, and 2023 was the third consecutive year of fresh all-time peaks.

The chart shows gold’s move to a $2,130.20 per ounce high on the continuous COMEX futures contract in December 2023. Gold moved over 13.45% higher in 2023. Silver did not follow in gold’s bullish footsteps in 2023.

The monthly silver chart shows a marginal 0.19% rise from $23.352 at the end of 2022 to $24.086. While silver edged lower, the platinum group metals did a lot worse.

Platinum fell, while palladium plunged

Even though South Africa and Russia dominate platinum group metals production and the bifurcation of the world’s nuclear powers has impeded trade, platinum prices fell, and palladium tanked in 2023.

The continuous NYMEX platinum futures chart shows a 7.33% annual decline.

Meanwhile, the price of palladium futures plunged 38.3%. Palladium and platinum closed above their worst levels of the year. Palladium had declined below the $1,000 level before recovering, under one-third the price at the 2022 $3,380.50 per ounce all-time high.

A soft landing supports precious metals in 2024

The November consumer and producer price index data and the PCE report showed inflation is moving towards the Fed’s 2% target rate. After aggressive rate hikes in 2022 and 2023, the U.S. central bank has paused with the Fed Funds Rate at 5.375%. Moreover, the December FOMC meeting marked a monetary policy pivot from hawkish to dovish as the central bank forecasts rate cuts in 2024.

Recession fears peaked in 2023, but it appears the U.S. economy is in for a soft landing. Falling interest rates tend to be bullish for precious metals prices for three reasons:

• They lower the cost of carrying the metals.
• They make metals more attractive compared to fixed-income products.
• Perhaps most significantly, lower rates weigh on the value of the U.S. dollar.

A weakening U.S. currency tends to support higher precious metals prices.

Geopolitics remain bullish

Gold tends to move higher during uncertain times, and a turbulent geopolitical landscape creates significant uncertainty. In early 2024, the war in Ukraine continues to rage. The Middle East remains a tinderbox with the war between Israel and Hamas and Iran’s support for those groups and countries seeking to destroy Israel. The bifurcation of the world’s nuclear powers has pushed the Doomsday Clock to 90 seconds to midnight, the closest to global catastrophe in history. The geopolitical landscape is bullish for gold, and silver tends to follow the precious yellow metal. Meanwhile, central banks continue to buy gold, adding to reserves and validating gold’s role in the global financial system. The potential for a BRICS currency with gold backing to challenge the U.S. dollar’s reserve currency status only increases gold’s profile as a means of exchange and store of value.

Green energy initiatives support platinum group metals as catalytic converters that clean toxic emissions from the environment and require platinum and palladium. The COP28 draft did not include phasing out fossil fuels, disappointing climate change activists. Continuing oil and oil product consumption and production means more demand for platinum and palladium for automobile and oil refinery catalysts in 2024 and beyond.

Green energy initiatives are also bullish for silver’s industrial demand, as solar panels require silver. Moreover, silver investment demand will likely increase and perhaps skyrocket if gold prices continue to make higher highs.

GLTR owns a basket of the four precious metals that trade on the COMEX and NYMEX

The top holdings of the abrdn Physical Precious Metals Basket Shares ETF include:

The chart highlights that GLTR holds over 62% of its assets in gold bullion and over 26.7% in silver bullish. Meanwhile, over 10% of its assets are in the volatile platinum group metals.

At $90.92 per share on January 2, GLTR had around $959 million in assets under management. GLTR trades an average of over 36,700 shares daily and charges a 0.60% management fee.

The chart shows that GLTR edged 2% higher in 2023, moving from $89.23 to $91.02 per share. The appreciation reflects gold’s rally, silver’s slight decline, and significant price decreases in platinum and palladium.

I favor the upside for precious metals in 2024. abrdn Physical Precious Metals Basket Shares ETF holds the physical metals, which provides direct exposure to the traded precious metals.

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