Miner ETFs have badly underperformed precious metal prices in recent years. Investors trying to time the bottom in miner shares have been continually burned, but some analysts think that the cheap valuations and dividends in miner stocks could help bridge the gap.
“We think valuation disconnects relative to bullion as well as higher dividend payments could help gold mining equities regain some ground,” writes Joung Park, equity analyst, for Morningstar.
Gold miner shares have lagged behind gold bullion over the past 12 months, but the difference has lessened in recent months – Morningstar’s gold mining list has gained 9.8% over the last three months, whereas gold inched 2.9% higher over the same period. [Weekly ETF Review: Gold, Silver and Miners Lead the Way]
“We think the disconnect between gold prices and valuations for gold miners, as well as higher dividend payouts from many of the larger gold producers, could help to decelerate the free fall in gold mining equity prices by attracting more investor capital flows into gold mining shares,” Park added.
Gold miner ETF options include:
- Market Vectors Gold Miners ETF (NYSEArca: GDX): 0.52% expense ratio; 0.35% yield. GDX has gained 4.1% over the last three months.
- Market Vectors Junior Gold Miners Fund (NYSEArca: GDXJ): 0.54% expense ratio; 6.18% yield. GDXJ increased 8.2% over the last three months.
- iShares MSCI Global Gold Miners Fund (NYSEArca: RING): 0.39% expense ratio; 1.29% 30-day SEC yield. RING is up 2.3% over the past three months.
- Global X Pure Gold Miners ETF (NYSEArca: GGGG): 0.59% expense ratio; 2.44% yield. GGGG rose 4.1% over the last three months.
However, “rampant cost inflation and heightened competition for investor inflows by bullion bars and gold-backed ETFs remain key downside risks for gold mining shares,” Park cautioned.
Meanwhile, silver miners, along with physical silver, ETFs have vaulted. For instance, the Global X Silver Miners ETF (NYSEArca: SIL) has jumped 15.3% and the iShares MSCI ACWI Select Silver Miners Investable Market Index (NYSEArca: SLVP) increased 13.7% over the past three months. In comparison, the iShares Silver Trust (NSYEArca: SLV) gained 7.4% over the same period.
For more information on gold or silver producers, visit our gold miners and silver miners categories.
Max Chen contributed to this article.