Big rise in gold, silver and platinum ETFs shows good background...

Big rise in gold, silver and platinum ETFs shows good background investor interest
Precious metals ETFs showed big increases in the first quarter of the year - platinum rising even more than gold and silver which both showed big increases.

Posted: Thursday , 02 Apr 2009

LONDON (Reuters) -

Precious metals-backed exchange-traded funds saw huge inflows in the first quarter of the year as investors sought the safety of physically backed products amid volatility in the price of other assets.

Holdings of the world's largest gold-backed ETF, New York's SPDR Gold Trust GLD climbed 44 percent or nearly 350 tonnes, while the biggest silver-backed fund, the iShares Silver Trust SLV saw inflows of 22 percent.

European ETFs also posted sharp gains. In Switzerland, holdings of Zurich Cantonal Bank's gold-backed ETF rose 37.5 percent, while investment bank Julius Baer's assets more than tripled to 1,004,575 ounces.

London-based ETF Securities said holdings of its gold-backed products including Gold Bullion Securities GBSx.L and Physical Gold PHAU.L rose 23 percent quarter-on-quarter.

"What we're seeing from investors is a lot of background interest in gold," said Daniel Wills, senior analyst at ETF Securities. "In the current environment it stands out not only as an inflation hedge but as a U.S. dollar hedge."

"People are looking for hard assets with good structural growth stories," he added.

ETF Securities said it saw the largest inflows in percentage terms into the more industrial precious metals, especially platinum. Holdings of its platinum-backed exchange-traded commodity rose 87 percent on the quarter, it said.

"Platinum has been getting a bit more of a pick-up from some of the more cyclical indicators consolidating a little bit," said Wills.

Analysts say that with the inflation outlook and uncertainty in the financial markets still supportive for gold, investment interest in the metal is likely to remain strong.

"There are continuing difficulties within the financial sector unnerving investors (and) growing fears of inflation generating by quantitative easing," said John Meyer, an analyst at investment bank Fairfax.

"Inflation is a necessary consequence of the financial mess the Western world's banks are in."

(Reporting by Jan Harvey; Editing by James Jukwey)

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