With gold prices on a seemingly undaunted path higher, gold miners are getting in on the act. With that in mind, investors may want to evaluate ETFs such as the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU).
GOAU a smart beta offering that tracks a specialized or rules-based index to help hone in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis to pick stocks, with a particular focus on royalty companies.
“Canaccord Genuity analyst Martin Roberge has an Overweight rating on gold and gold miners,” reports Connor Smith for Barron’s. “He notes that, despite the S&P 500 pushing to record highs, gold has risen above its levels from August. Its rise has also coincided with a strengthening dollar–another contradiction unless gold is on the rise as a safety bet. He also notes gold has historically performed well in low-interest-rate environments.”
Good Timing For GOAU
The yellow metal, which is a traditional safe-haven for investors, is benefiting from the current global uncertainty involving the coronavirus outbreak, which is significantly damaging global economic growth. April gold was recently up nearly $20 an ounce, reaching a high above $1,605. A subsequent flirtation with $1,700 per troy ounce has some banks boosting bullion price targets.
Royalty companies are not responsible for costly infrastructure so huge operating expenses can be avoided. These companies hold highly diversified portfolios of mines and other assets to mitigate concentration. They generate some of the highest revenue per employee of all public companies while growing cash flows and dividends.
There are some other potential catalysts for GOAU looming as well.
“The Toronto Stock Exchange Global Gold Index (TTGD) topped its August 2019 high on Wednesday and was nearing its July 2016 peak at about 279 Canadian dollars (US$210.51) on Thursday,” according to Barron’s. “Roberge argued that the 2016 peak could be the last resistance before gold breaks out into a second phase of its bull run. Historically when that happens, gold equities average 159% returns through the peak of that phase, based on his analysis.”
For long-term investors considering GOAU, there’s good news as well because some analysts believe gold can rise to $2,000 per troy ounce over the next 12 to 24 months.
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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.