When stocks swooned in the fourth quarter, finding equity-based ETFs that were rising was a difficult task. On that note, gold miners ETFs, such as the VanEck Vectors Gold Miners ETF (NYSEArca: GDX) and the U.S. Global GO GOLD and Precious Metal Miners ETF (NYSEArca: GOAU) stood out.
That theme is continuing this year as GDX, the largest gold miners ETF, is higher by 7% while GOAU is up nearly 11%.
Investors have seen government policy on both the monetary and fiscal side, such as interest rates, money supply, tax, regulations and spending, affect the outlook for gold prices. An overarching theme in recent months has been the trade wars as the U.S. and China make up 40% of global GDP. Meanwhile, with the economy slowing and the Federal Reserve easing up on interest rate hikes, more investors are warming up to gold for a safety play to hedge any further risks down the road.
Industry consolidation could also serve as a catalyst to drive gold miners higher.
“Barrick Gold Corp.’s $5.4 billion purchase of Randgold Resources Ltd. set off a chain reaction that led to Newmont Mining Corp.’s $10 billion deal for Canada’s Goldcorp Inc. last month,” reports Bloomberg. “The flurry of activity – which coincided with a late-2018 surge in bullion prices – has re-ignited interest in gold, throwing the whole industry into a thrall of speculation over who might be next.”
What’s Next for Gold
Newmont’s deal for Goldcorp has touched off rampant speculation about which gold miners, including some names residing in GDX and GOAU, could be next to be acquired.
“Further afield, analysts have tapped companies from Kinross Gold Corp. to Iamgold Corp. and Australia’s Newcrest Mining Ltd. as names to watch amid expectations that the wave of deals has further to run,” according to Bloomberg.
GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies. Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens.
A slew of fundamental factors support more upside for the group. Those factors include rock-bottom valuations and the potential for increased mergers and acquisitions activity.
“Gold equities have also been boosted by a rebound in bullion. The metal’s impressive December rally has carried over into 2019 as concerns stack up about slowing global growth and holdings in exchange-traded funds continue to expand,” according to Bloomberg.
For more information on the gold markets, visit our gold category.