In this week’s Macro Theme, we review our “Slowing Dragon” theme. We began discuss...
2012: The Next Great Buying Opportunity in Gold
01/18/2012 10:00 am EST
ETFs Offer Easy Access to Metals and Miners
Gold has been on an unbelievable run over the last ten years. The price of the yellow metal has surged from $275 an ounce to over $1900 per ounce at its peak in late 2011. The European debt crisis, and the slowdown in China and India, has combined to take a toll on gold prices in the latter half of the year. That means now is the perfect time to for investors to consider going for the gold.
The fundamentals that have powered gold prices higher for the past ten years have not changed. Gold still is the ultimate source of real money in a world where governments seek to inflate away their past sins. And despite the recent pullback in gold, I think the persistent worries over the future of the US economy and its precarious fiscal situation could lead to an explosion in the price of gold, and in particular, gold mining stocks. In fact, shares of mining companies have vastly underperformed the actual physical metal over the past two years, and this relative underperformance sets us up for a great buying opportunity in the sector.
Taking advantage of that opportunity in gold and precious metals mining stocks has never been easier thanks to exchange traded funds, or ETFs. Here are just a few of my favorite ways to gain exposure to the precious metals segment.
Market Vectors Gold Miners ETF (GDX)
This was the first pure gold mining fund, and it is comprised of over 30 large-cap mining stocks. This ETF has over $8 billion in assets, and has an expense ratio of just 0.53%. GDX has most of its holdings in North America-Canada (64%) and the US (14%). For a complete fact sheet and list of holdings please visit www.vaneck.com.
Market Vectors Junior Gold Miners ETF (GDXJ)
This fund is the small cap equivalent to GDX. GDXJ has over 70 securities concentrated in the small-cap segment of the precious metals mining industry. This fund tends to be more volatile than its large-cap cousin, but it also offers investors more upside potential. The fund's holdings are mostly concentrated in Canada and Australia. GDXJ has over $2 billion in assets and an expense ratio of 0.54%
ETFS Physical Precious Metals Shares (GLTR)
This fund holds specific quantities of precious metals in vaults around the world. Each share of the fund gives you the following mix of metal exposure: gold (52%), silver (34%), platinum (9%), and palladium (4%). This fund is a pure play on rising precious metals prices, as it gives you exposure to the "big 4" precious metals in one security.
Gold, gold mining, and precious metals funds offer investors a great way to diversify a stock and bond portfolio. They also serve as a hedge against a declining dollar and rising inflation. Now is the time to once again consider gold and gold mining funds in your portfolio.
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