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Gold has been on a tear, thanks to the patient Fed and the investors’ flight to safety. The trend is likely to continue in the coming weeks as well.
In its FOMC meeting in January, the Fed put pause on interest rates hikes, which in turn raised the appeal of gold. Lower interest rates will continue to weigh on the dollar against the basket of currencies, raising the yellow metal’s attractiveness as it does not pay interest like fixed-income assets (read: Can Gold ETFs Continue to Shine in 2019?).
The U.S.-China trade talks, which led to speculation of higher gold demand from China, have also fueled optimism in the gold bullion market. Additionally, global growth worries, slowing growth in Chinese and European economies, Brexit concerns as well as geopolitical tensions continued to make investors jittery, raising the demand for safe haven avenues. Amid such a backdrop, gold is considered a great store of value and hedge against market turmoil.
Further, weak earnings trends bolstered the optimism in the gold outlook. Fourth-quarter earnings have been weak so far with growth materially below the pace set in the first three quarters of the year, and EPS beat percentage being the lowest in more than five years. The pace of growth is expected to decelerate further in the current quarter and beyond.
Adding to the bullishness is the strong demand primarily driven by the central bank’s rapid increase in purchase of the gold. According to the World Gold Council, global gold demand grew 4% in 2018. The central banks across the globe accumulated $5.82 billion worth of bullion — the highest level since 1967, led by Russia. Retail investment in gold bars and gold coins also grew 4% in 2018.
Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market (read: Why Materials & Mining ETFs Are Riding Higher).
Given this, we have highlighted five gold mining ETFs that have delivered double-digit returns so far this year. These could be excellent plays for investors who believe that gold will continue to move higher.
This fund follows the Sprott Zacks Junior Gold Miners Index, holding 36 stocks in its basket. Canada takes the top spot at 64% followed by South Africa (10.1%) and the United States (9.1%). The fund has amassed $49.3 million in its asset base and trades in moderate volume of around 36,000 shares a day. It charges 57 basis points (bps) in annual fees from investors.
The ETF provides exposure to companies involved in the exploration of gold deposits and tracks the Solactive Global Gold Explorers & Developers Total Return Index. It is home to 48 stocks, and Canadian firms dominate the fund’s return at 48.1% followed by Australia (28.4%) and the United States (9.2%). The fund is unpopular and illiquid with AUM of $37 million and average daily volume of 8,000 shares. Expense ratio comes in at 0.66% (read: Gold Mining Crushing the Market: Best ETFs & Stocks of Q4).
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU - Free Report) : Up 13.5%
This fund provides investors access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It holds a small basket of 29 securities with Canadian firms taking the lion’s share at 60.1% while Australian and American firms make up for 13.3% and 10.7%, respectively. GOAU has $13.8 million in AUM and trades in a light volume of 8,000 shares a day on average. It charges 60 bps in annual fees.
Invesco Global Gold and Precious Metals ETF : Up 13%
This fund tracks the NASDAQ OMX Global Gold and Precious Metals Index, which measures the performance of the most liquid, globally traded companies involved in gold and other precious metals mining-related activities. Holding 53 stocks in its basket, Canada takes the lion’s share at 49.7%, followed by Australia (18%) and the United States (11.1%). It has amassed $29.7 million in its asset base and charges 75 bps in fees per year. Volume is light at nearly 22,000 shares.
This fund follows the Sprott Zacks Gold Miners Index, holding 27 stocks in its basket. Here again, Canada takes the top spot at 68.5% followed by 15.1% in the United States. The fund has amassed $149.7 million in its asset base and trades in moderate volume of around 46,000 shares a day. It charges 57 bps in annual fees from investors (read: Newmont-Goldcorp Deal Puts Gold Mining ETFs in Focus).
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Gold Mining ETFs are Hot Now: Will This Continue?
Gold has been on a tear, thanks to the patient Fed and the investors’ flight to safety. The trend is likely to continue in the coming weeks as well.
In its FOMC meeting in January, the Fed put pause on interest rates hikes, which in turn raised the appeal of gold. Lower interest rates will continue to weigh on the dollar against the basket of currencies, raising the yellow metal’s attractiveness as it does not pay interest like fixed-income assets (read: Can Gold ETFs Continue to Shine in 2019?).
The U.S.-China trade talks, which led to speculation of higher gold demand from China, have also fueled optimism in the gold bullion market. Additionally, global growth worries, slowing growth in Chinese and European economies, Brexit concerns as well as geopolitical tensions continued to make investors jittery, raising the demand for safe haven avenues. Amid such a backdrop, gold is considered a great store of value and hedge against market turmoil.
Further, weak earnings trends bolstered the optimism in the gold outlook. Fourth-quarter earnings have been weak so far with growth materially below the pace set in the first three quarters of the year, and EPS beat percentage being the lowest in more than five years. The pace of growth is expected to decelerate further in the current quarter and beyond.
Adding to the bullishness is the strong demand primarily driven by the central bank’s rapid increase in purchase of the gold. According to the World Gold Council, global gold demand grew 4% in 2018. The central banks across the globe accumulated $5.82 billion worth of bullion — the highest level since 1967, led by Russia. Retail investment in gold bars and gold coins also grew 4% in 2018.
Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market (read: Why Materials & Mining ETFs Are Riding Higher).
Given this, we have highlighted five gold mining ETFs that have delivered double-digit returns so far this year. These could be excellent plays for investors who believe that gold will continue to move higher.
Sprott Junior Gold Miners ETF (SGDJ - Free Report) : Up 16%
This fund follows the Sprott Zacks Junior Gold Miners Index, holding 36 stocks in its basket. Canada takes the top spot at 64% followed by South Africa (10.1%) and the United States (9.1%). The fund has amassed $49.3 million in its asset base and trades in moderate volume of around 36,000 shares a day. It charges 57 basis points (bps) in annual fees from investors.
Global X Gold Explorers ETF (GOEX - Free Report) : Up 14.4%
The ETF provides exposure to companies involved in the exploration of gold deposits and tracks the Solactive Global Gold Explorers & Developers Total Return Index. It is home to 48 stocks, and Canadian firms dominate the fund’s return at 48.1% followed by Australia (28.4%) and the United States (9.2%). The fund is unpopular and illiquid with AUM of $37 million and average daily volume of 8,000 shares. Expense ratio comes in at 0.66% (read: Gold Mining Crushing the Market: Best ETFs & Stocks of Q4).
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU - Free Report) : Up 13.5%
This fund provides investors access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It holds a small basket of 29 securities with Canadian firms taking the lion’s share at 60.1% while Australian and American firms make up for 13.3% and 10.7%, respectively. GOAU has $13.8 million in AUM and trades in a light volume of 8,000 shares a day on average. It charges 60 bps in annual fees.
Invesco Global Gold and Precious Metals ETF : Up 13%
This fund tracks the NASDAQ OMX Global Gold and Precious Metals Index, which measures the performance of the most liquid, globally traded companies involved in gold and other precious metals mining-related activities. Holding 53 stocks in its basket, Canada takes the lion’s share at 49.7%, followed by Australia (18%) and the United States (11.1%). It has amassed $29.7 million in its asset base and charges 75 bps in fees per year. Volume is light at nearly 22,000 shares.
Sprott Gold Miners ETF (SGDM - Free Report) : Up 12.9%
This fund follows the Sprott Zacks Gold Miners Index, holding 27 stocks in its basket. Here again, Canada takes the top spot at 68.5% followed by 15.1% in the United States. The fund has amassed $149.7 million in its asset base and trades in moderate volume of around 46,000 shares a day. It charges 57 bps in annual fees from investors (read: Newmont-Goldcorp Deal Puts Gold Mining ETFs in Focus).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>