Related: Be Careful With Miners ETFs
Gold miners currently trade at about a 59% discount to gold prices since 2009, have a price-to-book value of 1.0x and an average dividend yield of 2.8%, which makes the sector look attractive from a valuation standpoint. Moreover, U.S. economic weakness and speculation of the Federal Reserve pushing back on another interest rate hike have contributed to a depreciating U.S. dollar, which has also helped support USD-denominated gold bullion. Consequently, a weaker USD makes alternative assets like metals more attractive.
Gold assets look more attractive in a low interest rate environment as the precious metal is more competitive against assets that pay low interest, like bonds. Additionally, if the Fed holds off on further rate hikes, it would suggests the economy is not as strong, which would also help gold attract safe-haven demand.
To that end, traders and investors mulling any of the aforementioned ETFs should monitor the dollar’s gyrations and news regarding interest rates. On that front, signs are encouraging because the most recent employment data indicate the Fed may not be able raise rates this month.
For more news and strategy on the Gold market, visit our Gold category.
Direxion Daily Gold Miners Bull 3X Shares