Gold Mining ETFs have been firing on all cylinders lately thanks to the dual favor by a dovish Fed and an aggressive China. The Fed seems to be in no hurry to hike interest rates this year and has hinted at just two hikes this year dampening the greenback and propelling the broader commodities including gold.
In fact, a volatile market outlook, which is making places for safe-haven assets like gold and a sagging dollar, led the gold bullion to rally hard this year. Gold bullion ETF SPDR Gold Shares (GLD) has surged 18.3% so far this year (as of April 11, 2016), enjoying the largest first-quarter gain in three decades (read: How to Trade in Gold ETFs After Robust 30-Year Rally?).
Along with the underlying metal gold, gold mining ETFs also put up great gains as these often trade as leveraged plays on gold. Plus, Chinese gold miners are hunting for lucrative foreign acquisitions thanks to lower gold prices so that they can acquire assets at a bargain, as per Wall Street Journal.
Wall Street Journal also reported that “if cash-rich Chinese gold miners embark on an asset-buying spree, China could reduce its dependency on other international producers for supplies and increase its heft in global gold markets Since many global gold mining companies are facing hard times due to years of low gold prices, these are appearing as lucrative acquisition targets of Chinese buyers.
China is the world’s top gold consumer, accounting for about one-third of the global demand. So, its interest in gold acquisition is self explanatory. In 2015, Barrick Gold Corporation (ABX) offloaded a 50% interest in Barrick (Niugini) Limited (BNL) to Chinese mining company Zijin Mining Group Co. Ltd. for a total cash consideration of $298 million.
Apart from Zijin, another company Zhaojin Mining Industry Co. Ltd. is mulling over the idea of an overseas gold mining acquisition, as per Wall Street Journal.
Several gold mining ETFs hit a 52-week high on April 11. Among them we highlight five ETFs below that exhibited strong pricing gains. The Weighted Alpha of most of these ETFs hovered around positive 50, indicating the possibility of further gains (read: Gold Mining ETF Investing 101).
Global X Gold Explorers ETF (GLDX)
The fund seeks to match the performance and yield of the Solactive Global Gold Explorers Index. The $39.2-million ETF charges 65 bps in annual fees and has a dividend yield of 7.58% (as of April 11, 2016). First Mining Finance, Seabridge Gold and Oceanagold Corp command the top three positions in the basket.
Market Vectors Junior Gold Miners ETF (GDXJ)
This one tracks the Market Vectors Junior Gold Miners Index, which provides exposure to small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining. The $1.97-billion product charges 55 basis points in annual fees with a paltry annual dividend yield of 0.46%. B2gold Corp, Alamos Gold Inc and Centamin Plc occupy the top three positions in the 49-stock fund.
ALPS Sprott Junior Gold Miners ETF (SGDJ)
SGDJ seeks to deliver exposure to the Sprott Zacks Junior Gold Miners Index. Each stock’s weighting in the index is based on two factors, namely revenue growth and price momentum. The $34.3-million ETF charges investors 57 basis points on an annual basis. Among individual holdings, Sibanye Gold Limited, Detour Gold and Tahoe Resources occupy top three spots in the fund.
iShares MSCI Global Gold Miners (RING)
The fund seeks the MSCI ACWI Select Gold Miners Investable Market Index. The $103-million ETF charges 39 basis points a year. The fund currently has 29 companies in its basket, with the top stocks being Barrick Gold Corp, Newmont Mining Corp and Gold Corp (read: Top ETF Stories of First Quarter 2016).
Sprott Gold Miners ETF (SGDM)
SGDM tracks the Sprott Zacks Gold Miners Index, which is a rules-based index that assigns weighting to a stock on the basis of fundamental factors like revenue growth and balance sheet strength. This $173-million ETF charges 57 bps in fees. The fund currently holds 25 stocks. Among individual holdings, Franco-Nevada Corporation, Goldcorp and Agnico Eagle comprise 40% of the portfolio.
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