Gold continued to shine on safe-haven demand triggered by escalation in the trade spat between the world’s largest economies, as well as global easy monetary policies. Notably, gold futures rose above $1500 per ounce on the Comex, the highest level since 2013.
Trade tensions worsened with Trump’s new tariff of 10% on the remaining $300 billion of Chinese goods and China’s retaliation by allowing its yuan currency to drop to an 11-year low. China also reportedly halted imports of U.S. agricultural products. Additionally, Trump branded China as a currency manipulator thereby resulting in a currency war. The tit-for-tat situation has raised concerns over global economy, which is already witnessing a slowdown (read: ETF Areas Under Focus on China's Yuan Devaluation).
The International Monetary Fund (IMF) has recently cut its global growth forecast to 3.2% from 3.3% for this year and to 3.5% from 3.6% for the next, citing further U.S.-China tariffs, U.S. auto tariffs, weaker investment, disruption of global supply chains, and severely slow global growth.
Against this backdrop, gold is considered a great store of value and hedge against market turmoil.
The Federal Reserve last week cut interest rates by 25 bps to 2-2.5% for the first time since the 2008 financial crisis. This has propelled the yellow metal higher as lower rates will continue to weigh on the dollar against the basket of currencies, raising the yellow metal’s attractiveness given that gold does not pay interest like fixed-income assets (read: Fed Cuts Rate: Sector ETFs & Stocks Set to Soar).
Additionally, easing money policies from other major central banks also boosted the yellow metal.
How to Play?
Given the optimism and intense buying pressure on gold, investors have a long list of options, in both the ETF & stock world, to tap the metal’s rally. Below, we have highlighted some of them:
While there are many products that are directly linked to the spot gold price or futures, we have highlighted ETFs that have hit new highs in the recent session and carry a favorable Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
SPDR Gold Trust ETF (GLD - Free Report) : This is the largest and most popular ETF in the gold space with AUM of $39.3 billion and average daily volume of around 8.3 million shares. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio comes in at 0.40% (read: Should You Buy Gold ETFs Now?).
iShares Gold Trust (IAU - Free Report) : This ETF offers exposure to the day-to-day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase Bank in London. It has AUM of $14.6 billion and trades in solid volume of 16 million shares a day on average. The ETF charges 25 bps in annual fees.
SPDR Gold MiniShares Trust (GLDM - Free Report) : This product seeks to reflect the performance of the price of gold bullion. Being a low-cost product with expense ratio of just 0.18%, GLDM has amassed $903.7 million in AUM and trades in a solid average daily volume of 877,000 shares (read: Grab These Safe Haven ETFs Amid Intensifying Trade Spat).
Gold Mining ETFs
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. Hence, mining ETFs and stocks are outperformers. We have highlighted the ones that are leading this year:
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU - Free Report) : 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 tracks the U.S. Global Go Gold and Precious Metal Miners Index, holding 28 stocks in its basket. Canada takes the lion’s share at 56.8%, followed by South Africa (17.8%) and United States (12.9%). It has amassed $20.1 million in its asset base and charges 60 bps in fees per year. Volume is light at nearly 12,000 shares.
iShares MSCI Global Gold Miners ETF (RING - Free Report) : This ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 35 securities in its portfolio. Canadian firms take half of the portfolio, while United States, South Africa and Australia round out the top four with a double-digit exposure each. RING is the cheapest choice in the gold mining space, charging just 39 bps in fees and expenses. The fund has been able to manage assets worth $264.6 million and trades in a good volume of 207,000 shares per day (see: all the Precious Metal ETFs here).
Sprott Gold Miners ETF (SGDM - Free Report) : This fund follows the Solactive Gold Miners Custom Factors Index, holding 30 stocks in its basket. Here again, Canada takes the top spot at 59.9% followed by 20% in the United States and 17% in the South Africa. The fund has amassed $187 million in its asset base and trades in a lower volume of around 34,000 shares a day. It charges 57 bps in annual fees from investors.
Gold Mining Stocks
These gold mining stocks have been performing well and are looking to post double-digit growth for this year. Additionally, these have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Kinross Gold Corporation (KGC - Free Report) : This Zacks Rank #1 company is engaged in the acquisition, exploration and development of gold properties in the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. It has gained 47.5% so far this year and is posed to log impressive earnings growth of 110% for 2019. The stock has a VGM Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
Harmony Gold Mining Company Limited (HMY - Free Report) : This Zacks Rank #2 company is engaged in the exploration, extraction and processing of gold in South Africa and Papua New Guinea. Its earnings are expected to grow a whopping 223.08% for the fiscal year ending June 2020. The stock has gained 59.2% so far and has a top VGM Score of A.
Alamos Gold Inc. (AGI - Free Report) : This Zacks Rank #1 company is engaged in the acquisition, exploration, development and extraction of gold deposits in North America. The stock is up nearly 112.2% so far this year. The strong performance is expected to continue given that it also has a VGM Score of B and its earnings are expected to grow 280% this year.
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