Although gold prices have retreated from their highs, gold miner exchange traded funds (ETFs) are still a viable way to profit from the still-elevated prices.
Gold miners are on a tear these days. Here’s why:
- Gold prices may not be at records anymore, but they are still historically high. This means miners are still enjoying nice profit margins, because the cost of extracting and producing gold remains at relatively stable levels.
- Dave Kansas for The Wall Street Journal reports that two gold mining companies have reported good fourth quarter profit: Barrick Gold (NYSE: ABX) reported a record fourth-quarter profit this morning, and it had bullish things to say about gold prices. South Africa’s AngloGold Ashanti (NYSE: AU) also had a strong quarter and remained upbeat about gold prices. [Gold ETFs: Three Metals Doing Better.]
- Supplies at mines are shrinking and is only expected to continue to go down. Christopher Barker for The Motley Fool reports that gold mining stocks are poised for another major growth spurt. As world class gold mines do become more scarce, major miners have few alternatives to the prospect of buying their way to replacing production over time. [What’s Got Gold Miner ETFs Down?]
Strategic acquisitions and mergers are expected to go up, and this could be the ticket for gold miners to sustain themselves, and a way to increase global gold production.
Those acquisitions may be to the benefit of both the gold miner ETFs: Market Vectors Gold Miners (NYSEArca: GDX), which tracks the world’s largest gold miners. Barrick is the largest holding, with 16.6% of the total weight; AngloGold also gets a hefty representation with 6% of the ETF. Market Vectors Junior Gold Miners (NYSEArca: GDXJ) tracks the smaller mid-cap and small-cap miners. If the small miners become acquisition targets, it could be to the benefit of this ETF.
Additionally, you can play the hunt for new gold mines with Global X Gold Explorers (NYSEArca: GLDX), which has been doing well of late – up nearly 15% in the last three months.
Tisha Guerrero contributed to this article.
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.