“The link between gold consuming countries and gold prices is pretty straightforward,” Koesterich said. “The valuations of these countries tend to suffer when gold prices rise, as consumers in such countries face incremental pressure from rising gold prices.”
Single-country ETFs tracking the largest net gold consumers include iShares S&P India Nifty 50 (NasdaqGM: INDY), iShares MSCI Germany (NYSEArca: EWG) and iShares MSCI Switzerland (NYSEArca: EWL).
Meanwhile, country funds indexed to the largest net producers include iShares MSCI Australia (NYSEArca: EWA), iShares MSCI South Africa (NYSEArca: EZA), iShares MSCI Russia (NYSE: ERUS) and iShares MSCI Peru (NYSEArca: EPU).
“Gold producer companies are often listed in countries other than where the mines are located, and any benefits of the mines to the local economy depend on highly idiosyncratic local leasing and labor contracts,” Koesterich added. “But while the valuations of countries with gold mines may not always be fundamentally linked to gold prices, investor perception likely helped drive up the sensitivity of such countries’ valuations to the metal.”