What is an investor to do when he or she wants a gold miner’s exchange traded fund (ETF) without all the attendant risks?

That was the dilemma facing Trader Mark at Seeking Alpha. In the wake of the South African mining halt, he wanted a stock that wouldn’t be so concentrated in that area of the world. He also wanted a stock with as little risk and as unhedged as possible.

We think the real meat in his story is this nugget at the end: "There is also more risk as opposed to playing the simple route and just buying the metal ETF itself." Mark wants a stock because it would offer some nice leverage opportunities if gold marches on upward.

The Market Vectors Gold Miners (GDX) offers exposure around the world. Its top two holdings, both in Canada, make up 24.6% of the fund. Its three South African holdings make up 14.1%, a relatively small portion of its 34 total holdings. In 2007, it finished up 16.8%, while so far this year it’s up 11.7%.

We just wonder: when you’re looking for exposure to gold or anything else, why complicate things for yourself when ETFs make it so easy?


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.