Gold’s shine may have dulled a bit in 2022, but precious metals have not lost their luster. Despite rising interest rates and a historically strong dollar, gold has managed to stay competitive against traditional safe-haven government bonds and other asset classes.
In the upcoming webcast, Could Gold Be Poised for a Comeback In 2023?, Frank Holmes, CEO and chief investment officer at U.S. Global Investors, will discuss the outlook for gold miners and outline the role of the asset class in a diversified portfolio, with a particular emphasis on gold royalty companies.
Investors have been turning to hard assets to sit out the financial market volatility and economic uncertainty associated with policy actions.
“Investors have been diversifying with gold and silver for decades to limit their exposure to poorly executed monetary and fiscal policies. As I shared with you last month, investors bought more American Eagle and American Buffalo gold coins between January and September of this year than in any other such period going back to 1999,” Holmes said in a recent blog post.
“I believe this is largely a reflection of Americans’ souring opinion of the state of the economy and the imbalance they see in monetary and fiscal policies.”
To gain exposure to the rise of gold, investors may focus on a fund strategy that incorporates royalty and streaming companies, which many consider the “smart money” of the space. One such fund is the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU). The U.S. Global GO GOLD and Precious Metal Miners ETF is a smart beta offering that tracks a specialized or rules-based index to help home in on quality players in the gold mining space. The underlying U.S. Global GO GOLD and Precious Metal Miners Index uses quantitative analysis designed to capture the performance of companies engaged in the production of precious metals either through active (mining or manufacturing) or passive (owning royalties or production streams) means.
The ETF also includes a 30% tilt to royalty and streaming companies, which can help investors better manage common risks associated with traditional producers, such as building and maintaining mines. The lower risk may also diminish risk since royalty companies have historically rewarded investors by increasing dividends at a faster pace than the broader equity market.
According to U.S. Global, royalty companies are a superior way to target the gold mining segment. 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. Additionally, they generate some of the highest revenue per employee of all public companies while simultaneously growing cash flows and dividends.
Financial advisors who are interested in learning more about the gold sector can register for the Monday, December 12 webcast here.