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Gold Mining ETFs Rise on Demand in India: Will This Last?
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Gold, after falling nearly 10% this year, has started to rise again as there is a surge in demand led by India, the second-biggest consumer of gold globally (see: all Material ETFs here).
After falling for the first six months of the year, gold imports have picked up since July. Per a report by the GFMS team at Thomson Reuters, India’s gold imports were at 100 tons in August 2018, a year-over-year surge of 116.5%. Lower prices prompted jewelers to buy ahead and replenish inventory for an international jewelry exhibition.
India consumes 800-850 tons of gold on an annual basis, of which rural India’s consumption is 60%. As the monsoon period has cleared away, farmers have the time to purchase gold which they treat as safe haven. India’s government is also taking steps to increase rural income, which in turn would lead to more consumption of gold.
The festive and wedding seasons have begun which continue till January. Purchasing gold is considered auspicious during this period and could account for 30% of the total wedding cost. Per a report by World Gold Council, 1% increase in per capita income results in a hike in demand for gold by 1%. As the middle class and the country’s economy are expanding, it’s no brainer to see that India is a hot market for gold in itself. India’s GDP grew by 8.2%, the highest in two years , during April-June (Q1) 2018 (read: India ETFs: Proof to EM Shocks, What About Oil Shocks?).
As trade tensions were heating up, investors were flocking the dollar in search of safe haven but the situation has started to ease as the United States has invited Chinese officials for a new round of trade talks and a new NAFTA agreement is coming up.
If trade tensions persist, yuan could weaken further against the dollar resulting in gold price increasing in China, which is the world’s largest consumer of gold, since the dollar-priced gold becomes expensive for non-U.S. investors.
It tracks NYSE Arca Gold Miners Index. There are 49 holdings in the basket with Newmont Mining Corp (NEM - Free Report) occupying the top spot with 9.83% weight. AUM is $7.68 billion and expense ratio is 0.53%. It has returned 1.3% over the past week.
It tracks MVIS Global Junior Gold Miners Index. There are 71 holdings in the basket with Kirkland Lake Gold Ltd the top weight with 5.97%. AUM is $4.21 billion and expense ratio is 0.54%. It has returned 1.8% over the past week.
It tracks the MSCI ACWI Select Gold Miners Investable Market Index. There are 36 holdings in the pool of fund with Newmont Mining Corp occupying the top spot with 15.65% weight. AUM is $219 million and expense ratio is 0.39%. It has returned 1.9% over the past week.
It tracks the Sprott Zacks Gold Miners Index. There are 27 holdings in the basket and Kirkland Lake Gold Ltd holds the top position with 15.05%. AUM is $127 million and expense ratio is 0.57%. It has returned 2.7% over the past week.
It tracks the Sprott Zacks Junior Gold Miners Index. There are 39 holdings in the basket and OceanaGold Corp OGC is at the top with 9.73% weight. AUM is $92.2 million and expense ratio is 0.57%. It has returned 2.11% over the past week.
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Gold Mining ETFs Rise on Demand in India: Will This Last?
Gold, after falling nearly 10% this year, has started to rise again as there is a surge in demand led by India, the second-biggest consumer of gold globally (see: all Material ETFs here).
After falling for the first six months of the year, gold imports have picked up since July. Per a report by the GFMS team at Thomson Reuters, India’s gold imports were at 100 tons in August 2018, a year-over-year surge of 116.5%. Lower prices prompted jewelers to buy ahead and replenish inventory for an international jewelry exhibition.
India consumes 800-850 tons of gold on an annual basis, of which rural India’s consumption is 60%. As the monsoon period has cleared away, farmers have the time to purchase gold which they treat as safe haven. India’s government is also taking steps to increase rural income, which in turn would lead to more consumption of gold.
The festive and wedding seasons have begun which continue till January. Purchasing gold is considered auspicious during this period and could account for 30% of the total wedding cost. Per a report by World Gold Council, 1% increase in per capita income results in a hike in demand for gold by 1%. As the middle class and the country’s economy are expanding, it’s no brainer to see that India is a hot market for gold in itself. India’s GDP grew by 8.2%, the highest in two years , during April-June (Q1) 2018 (read: India ETFs: Proof to EM Shocks, What About Oil Shocks?).
As trade tensions were heating up, investors were flocking the dollar in search of safe haven but the situation has started to ease as the United States has invited Chinese officials for a new round of trade talks and a new NAFTA agreement is coming up.
If trade tensions persist, yuan could weaken further against the dollar resulting in gold price increasing in China, which is the world’s largest consumer of gold, since the dollar-priced gold becomes expensive for non-U.S. investors.
A string of upbeat economic data allows the Fed to go forward with rate hikes, which in turn affect gold which doesn’t provide interest (read: September Rate Hike Odds Rise: Top Sector ETF & Stock Picks).
The following gold mining ETFs are likely to continue shining because of Indian demand and curbing trade tensions.
VanEck Vectors Gold Miners ETF (GDX - Free Report)
It tracks NYSE Arca Gold Miners Index. There are 49 holdings in the basket with Newmont Mining Corp (NEM - Free Report) occupying the top spot with 9.83% weight. AUM is $7.68 billion and expense ratio is 0.53%. It has returned 1.3% over the past week.
VanEck Vectors Junior Gold Miners ETF (GDXJ - Free Report)
It tracks MVIS Global Junior Gold Miners Index. There are 71 holdings in the basket with Kirkland Lake Gold Ltd the top weight with 5.97%. AUM is $4.21 billion and expense ratio is 0.54%. It has returned 1.8% over the past week.
iShares MSCI Global Gold Miners ETF (RING - Free Report)
It tracks the MSCI ACWI Select Gold Miners Investable Market Index. There are 36 holdings in the pool of fund with Newmont Mining Corp occupying the top spot with 15.65% weight. AUM is $219 million and expense ratio is 0.39%. It has returned 1.9% over the past week.
Sprott Gold Miners ETF (SGDM - Free Report)
It tracks the Sprott Zacks Gold Miners Index. There are 27 holdings in the basket and Kirkland Lake Gold Ltd holds the top position with 15.05%. AUM is $127 million and expense ratio is 0.57%. It has returned 2.7% over the past week.
Sprott Junior Gold Miners ETF (SGDJ - Free Report)
It tracks the Sprott Zacks Junior Gold Miners Index. There are 39 holdings in the basket and OceanaGold Corp OGC is at the top with 9.73% weight. AUM is $92.2 million and expense ratio is 0.57%. It has returned 2.11% over the past week.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>