Precious metals ETFs rallied in the third quarter as the dollar weakened further and the Federal Reserve continued its quantitative easing efforts in hopes of boosting asset prices and lowering unemployment.
Europe, Japan, China, Brazil and India are all engaging in various forms of economic stimulus to support growth.
Biggest Winners
ETFs that track market volatility were top performers. Velocity Shares Inverse VIX Short-Term (XIV) jumped 61.63%.
Global X Silver Miners ETF (SIL) surged 39.57%. IShares Silver Trust (SLV), tracking silver bars, climbed 30.63% in the three months ended September. SPDR Gold Shares (GLD) rose 10.76% over the same period.
"Many people view (precious metals) as a substitute for paper currency in a time when paper currencies are being debased," said Bill Strazzullo, chief market strategist at Bell Curve Trading in Freehold, N.J. "Silver also has a number of industrial uses, which allows it to participate in risk-on rallies and any set of circumstances that portend an improving global economy."
PowerShares DB U.S. Dollar Index Bullish (UUP), measuring the dollar against a batch of foreign currencies, fell 3.78% in the quarter.
"In light of the debt situation in the U.S., the looming challenges of the fiscal cliff and massive entitlement obligations, the trend for the dollar is clearly lower in the medium and long-term," said Jason Schenker, chief investment officer of Prestige Asset Management in Austin, Texas. He recommends clients invest in gold bullion ETFs and sees the yellow metal spiking above $2,000 an ounce within six months.
ETFs tracking the world's most indebted and riskiest countries rallied the most despite the European recession and ongoing fears over the debt crisis.
Global X FTSE Greece 20 (GREK), up 32.25%, outperformed all countries. IShares MSCI Spain Index (EWP) rallied 19.77% and iShares MSCI Italy Index (EWI) rose 15.34%.
"Central banks are forcing investors to take risk by keeping interest rates low, so they are going for the most beaten down areas," said Matthew Tuttle of Tuttle Wealth Management in Stamford, Conn.
Market Vectors Egypt Index (EGPT) rallied 26.85% in the third quarter and a whopping 64.80% year to date. It rebounded sharply after crashing 52% last year.
"This is what many would call a 'dead cat bounce' and part of the overall 'risk on' dynamic that most of 2012 has taken on," said Scott Freeze, president of Street One Financial, a broker-dealer in King of Prussia, Pa. "Egyptian publicly traded companies were pummeled by the lack of confidence and broader 'risk off' rotation last year."
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Q3 Top ETF Winners And Losers: Silver Miners Soar
