However, investors planning to buy precious metals to stabilize their portfolio or exploit return opportunities will find themselves faced with a very important question: What is the best way to invest in precious metals?


The most obvious option seems to be the direct purchase of bars or coins, at least when standard trading quantities are involved.

• If precious metals are stored at home, there is a security risk; if they are stored in a bank safe deposit box, additional costs are incurred. 
• Buying and selling them is also generally labor-intensive and time-consuming, with the risk of large spreads between buy and selling prices.

This is frequently the case for precious metal accounts as well, which are additionally subject to issuer risk.

Why UBS precious metals ETFs are an attractive alternative to stocks

UBS ETFs on precious metals offer the flexibility and liquidity of stocks combined with the advantages of coins and bars. One of the key benefits of UBS ETFs is that investors' capital is invested in physical precious metals, with the UBS ETF (CH) Gold investing up to 100% in physical gold.

For the white metals (silver, platinum and palladium) the equivalent value of up to one standard bar remains on a metals account. This allows maximum holdings of under one bar to be exposed to the performance of the respective white metal.

UBS ETFs are stored securely in vaults

All assets are otherwise invested exclusively in physical precious metals, which are stored separately in a specially designated high-security vault in Switzerland. Nevertheless, UBS ETFs on precious metals can be traded as flexibly as equities.

 If investors prefer, they are entitled – in lieu of cash redemption – to redemption in kind, i.e. starting at a certain amount, investors can have the equivalent value of their ETF units in Switzerland delivered in standard bars or, in the case of UBS ETFs on gold, in other standard trading units up to 1 gram.

Irrespective of the economic conditions, gold is virtually always in demand

When economic conditions are favorable and people consume more luxury goods, there is growing demand in the watch and jewellery industries, for example, while the use of gold in the industrial sector and in dentistry also increases.

By contrast, demand for gold among investors is stronger in times of economic uncertainty as gold is seen as a secure investment. Since gold is rare and durable, it possesses real value – provided the investments are in physical gold.

For many investors, gold's stability in terms of value also makes it an ideal hedging tool against inflation.

Stagnating production

Growing demand for gold stands contrasts with its stagnating supply. Gold mine production has flatlined since its peak in 2001. Many mines are already relatively old while major new gold discoveries are rare – and when new gold veins are found, preparatory excavation work often take several years.

Water treatment as demand driver

As the world's best electrical conductor, silver plays a key role in the manufacture of electronic goods, which accounts for roughly one-half of the precious metal demand. With rising prosperity and rapid industrialization in emerging countries, its demand should continue to grow in the coming years.

Its antiseptic properties mean that silver is also needed in ever-increasing quantities for water treatment, for example, so demand for it is already exceeding supply.

Steadily rising demand

Over recent years, silver has also become increasingly popular among investors, and the proportional amount of silver used for coins and direct investments has steadily risen. The reasons for the growing demand on the part of investors are similar to those behind that for gold: As physical silver also possesses real value, it can offer long-term protection against inflation.

Similarly, the price of silver is generally negatively correlated with the US dollar – i.e. its price moves either independently of or counter to US currency. The addition of silver to an investment portfolio can hedge to some extent against exchange rate fluctuations in the US dollar.

Harder and more stable than gold

Like silver, platinum is also particularly corrosion-resistant. That is why the precious metal is in such demand for the manufacture of watches and jewellery, fountain pen nibs, laboratory equipment, dental implants and rust-proof components. 

Platinum's arguably most important use is in the manufacture of catalytic converters for the automotive industry. Automobile production accounts for about half of today's global demand for platinum and looks set to boom also in the years ahead. The Indian and Chinese markets in particular could well be the main growth drivers, a clear indication that the demand for platinum is closely linked to global economic growth.

Limited supply

Yet the supply of platinum is comparatively limited. An increase in demand would lead to a shortage in the market and drive platinum prices higher. Three-quarters of the world's platinum supply originates from South Africa.

The long-term outlook for platinum prices is positive thanks in part to this combination of growing demand and inelastic supply.

In demand both in India and in China

Palladium resembles platinum in many ways with the distinction that it is harder, tougher and more malleable than platinum, or any other precious metal for that matter. This accounts for the widespread use of high-strength palladium alloys in the jewellery and dental industries. 

Even more important, however, is the role of palladium as an industrial metal, notably in catalytic converters for automobiles. The manufacture of exhaust gas purifiers accounts for about half of the demand for it. Like platinum, then, palladium may also benefit from the upward trend in the automotive industry in coming years, with the markets in India and China very likely to be the main growth drivers.

Expected continuation of the upward trend

If the global economy starts to pick up again, we should see stronger demand for palladium in other industrial applications as well, ranging from the manufacture of electrical and electronic products to electroplating and the production of chemicals through to the purification of hydrogen. In these applications and in catalytic converters, palladium comes into its own thanks to its outstanding ability to bind hydrocarbons.