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It’s been a great year for bullion with gold hitting a 28-month high and silver climbing to a 24-month high. Global markets have been under the clasp of risk aversion since Brexit in June end. Though after two-days of steep sell-offs the broader market staged a rally to close out 1H16, it seemed like a dead cat bounce as the market has again been in shambles since the start of July. Renewed fears of contagion from Brexit blotted out the surge (read: 3 ETFs in Focus on S&P 500's Best Weekly Gains YTD).
Volatility levels are high and the flight to safety is back. As a result, most of the safe haven assets including gold and silver skyrocketed. In any case, Brexit or not, 2016 has been rocky since the start. Barring some occasional positives, heightened global growth concerns, fears of deflation and the acute plunge in oil prices made the first quarter of 2016 extremely erratic.
While things started to improve from Q2, Brexit fears once again started spooking investors. However, a sluggish dollar has helped commodities and delay infurther Fed policy tightening due to the vulnerability of the U.S. economy to the U.K. has given demand for non-interest rate bearing assets like gold a boost.
All these clearly explain the recent run in gold as well as silver bullion prices. But what is drawing attention all the more is the jump in gold and silver mining stocks and the related ETFs.
Mining ETFs Beating Bullion ETFs
Investors should note that gold mining ETF Global X Gold Explorers ETF has advanced about 171.7% this year (as of July 6, 2016) while the gold bullion ETF SPDR Gold Shares (GLD - Free Report) has returned over 28% in the same timeframe.
In fact, silver mining ETFs are actually spiking lately, having gained over 15% last week (as of July 6, 2016). Many gold mining ETFs also recorded solid gains in the last five trading days, with several up over 10%.
Behind the Surge in Mining ETFs
First, mining stocks are often viewed as the leveraged plays of the underlying metals, which is helping the stocks of gold and silver mining companies. But a favorable demand-supply scenario holds the key to this surge.
Backdrop of Silver Mining
Silver has high usage in industrial activities with about 50% of total demand coming from industrial applications. With global manufacturing shoring up lately, industrial demand for the metal is set to rise this year. The thriving solar industry could also lead to a surge in total industrial demand for silver as the metal is a key constituent of solar cells (read: ETFs to Play 16-Month High US Manufacturing Data).
As per CPM Group, silver mining production is likely to decline for the first time since 2011 while demand from industrial usage and jewelry is on its way to log the fourth successive gain in 2016.
Given this recent move, it might be worth it to take a closer look at some broad mining ETF options as possible investments. Below, we highlight five choices in this space, any of which could be excellent plays for investors looking to cash in on the spurt in the metal mining space:
Mentioned below are three choices, which are from the silver mining space:
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Go Beyond Bullion; Buy These Mining ETFs
It’s been a great year for bullion with gold hitting a 28-month high and silver climbing to a 24-month high. Global markets have been under the clasp of risk aversion since Brexit in June end. Though after two-days of steep sell-offs the broader market staged a rally to close out 1H16, it seemed like a dead cat bounce as the market has again been in shambles since the start of July. Renewed fears of contagion from Brexit blotted out the surge (read: 3 ETFs in Focus on S&P 500's Best Weekly Gains YTD).
Volatility levels are high and the flight to safety is back. As a result, most of the safe haven assets including gold and silver skyrocketed. In any case, Brexit or not, 2016 has been rocky since the start. Barring some occasional positives, heightened global growth concerns, fears of deflation and the acute plunge in oil prices made the first quarter of 2016 extremely erratic.
While things started to improve from Q2, Brexit fears once again started spooking investors. However, a sluggish dollar has helped commodities and delay infurther Fed policy tightening due to the vulnerability of the U.S. economy to the U.K. has given demand for non-interest rate bearing assets like gold a boost.
All these clearly explain the recent run in gold as well as silver bullion prices. But what is drawing attention all the more is the jump in gold and silver mining stocks and the related ETFs.
Mining ETFs Beating Bullion ETFs
Investors should note that gold mining ETF Global X Gold Explorers ETF has advanced about 171.7% this year (as of July 6, 2016) while the gold bullion ETF SPDR Gold Shares (GLD - Free Report) has returned over 28% in the same timeframe.
The story was the same for silver, the bullion ETF (SLV - Free Report) of which has risen about 44.8%. But the silver mining ETF Silver Miners ETF (SIL - Free Report) has seen a leap of 164.9% year to date (as of July 6, 1016) (read: Silver or Gold ETFs: Which is The Best Bet for July?).
In fact, silver mining ETFs are actually spiking lately, having gained over 15% last week (as of July 6, 2016). Many gold mining ETFs also recorded solid gains in the last five trading days, with several up over 10%.
Behind the Surge in Mining ETFs
First, mining stocks are often viewed as the leveraged plays of the underlying metals, which is helping the stocks of gold and silver mining companies. But a favorable demand-supply scenario holds the key to this surge.
Backdrop of Silver Mining
Silver has high usage in industrial activities with about 50% of total demand coming from industrial applications. With global manufacturing shoring up lately, industrial demand for the metal is set to rise this year. The thriving solar industry could also lead to a surge in total industrial demand for silver as the metal is a key constituent of solar cells (read: ETFs to Play 16-Month High US Manufacturing Data).
As per CPM Group, silver mining production is likely to decline for the first time since 2011 while demand from industrial usage and jewelry is on its way to log the fourth successive gain in 2016.
Backdrop of Gold Mining
Gold demand jumped 21% year over year in Q1 on 5% higher supplies. Central bank buying mainly boosted demand (read: Reasons to Bet on Gold Mining ETFs Now).
Mining ETFs on the Radar
Given this recent move, it might be worth it to take a closer look at some broad mining ETF options as possible investments. Below, we highlight five choices in this space, any of which could be excellent plays for investors looking to cash in on the spurt in the metal mining space:
Mentioned below are three choices, which are from the silver mining space:
Silver Miners ETF (SIL - Free Report)
iShares MSCI Global Silver Miners ETF (SLVP - Free Report)
PureFunds ISE Junior Silver ETF (SILJ - Free Report)
Below are two choices from the gold mining space:
VanEck Vectors Junior Gold Miners ETF (GDXJ - Free Report)
Sprott Gold Miners ETF (SGDM - Free Report)
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