ETF Trends CEO Tom Lydon discussed the US Global GO Gold and Precious (GOAU) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
GOAU provides investors access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means.
Lydon explains that there is some confusion as to how gold ETFs work, with some ETFs holding physical gold, and others holding mining companies, which can be very lucrative but are often overlooked by investors.
“Gold has been very popular so far this year. We just saw gold hit a just six-year high. So that’s been really exciting. But we got a lot of questions from readers at ETF trends and ETF database where people are talking about gold itself as gold miners. And there’s a big distinction as you know. So there are a lot of ETFs out there today that represent specifically gold and spot gold. And there are a lot of choices. They are all backed by gold bars, and they’re actually held within vaults in certain areas of the world, and there is an accounting system that makes sure there is enough gold in those vaults to represent the shares of the ETFs, the biggest one being GLD. So we know that that exists and it’s great for people who want to buy gold, but don’t wanna have to store it, don’t wanna have to ensure it, don’t wanna have to transport it; it’s a great way to buy gold today. However, the miners, that are publicly traded, that get gold out of the ground, are very profitable during times when the price of gold goes up, and that’s happened recently as we pointed out.”
While gold and gold ETFs in general have had a successful run lately, the US Global GO Gold and Precious ETF has done exceedingly well in comparison.
“So just put things in perspective, so far year-to-date the price of gold and GLD has gone up about 19%. In general the gold miners ETFs are about 35 to 40%. GOAU is actually up 52%, outperforming all of them.”
Lydon points out that one of the benefits of the ETF is that it utilizes consistent royalties from the gold mining companies, which only become more available as gold prices rise and the metal becomes more popular.
“The structure of this ETF not only has gold miners but it has gold realtors in the construction. And these realty companies, what they do is almost rent out mines, so people can pull the gold out of the ground. Those rents for those royalty companies that come in pay a consistent amount of money, so it provides that consistency over time. As gold goes up and the prices go up, the royalty being paid goes up. To a great degree it’s a key important part of the mining ecosystem. But we don’t spend enough time talking about it, and this in fact is the only ETF that is very heavily weighted in these royalty companies. With that in mind it’s a different way to look at minors for sure.”
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