Gold miners are spiking on heavy volume today after billionaire investor Warren Buffett revealed he’s betting big on Barrick gold. Meanwhile, the VanEck Vectors Gold Miners ETF (GDX) is up 5%, on pace for its best day in almost four months. Dave Nadig, ETF Trends’ CIO and director of research, and Christ Hempstead, Director of Institutional Business Development at IndexIQ, were both on CNBC’s “ETF Edge” with host Bob Pisani to go over what to make of all of this.
As Buffett’s position on gold hasn’t been the highest in the past, this is coming as a bit of a surprise. However, as far as seeing investors suddenly subscribing to the methodology of gold, Nadig feels that while the metal has certainly been a big ETF story this year, it’s also worth pointing out the global gold demand is actually heavily down.
“This is a market being driven entirely by the ETF buyer, and at the same time, we have supply 15% off because we’ve had disruptions in mining,” Nadig says. “So we’re starting to see more activity in the miners and the junior gold miners, as they jockey for position, and investors continue to look at gold as a safe haven asset.”
A Junior Promise
Nadig goes on to state how the Vaneck Vectors Jr. Gold ETF (GDXJ) is one to look at with promise. This doesn’t have the same successful potential in the way Berkshire is moving, but there should be more activity to see coming in this space.
Looking over to Hempstead, he’s asked about gold’s role as a diversification play and what to know about gold stocks versus investing in gold directly. For his part, Hampstead states how the main difference is that investing in stocks means investing in a company with a reputation, which means there could be certain risks. On the other hand, physical gold is held in a vault.
So, depending on why an investor is looking to gold, the differences are clear, and it comes down to the way the tide may be turning as far as how to look at the potential.
Additionally, the GLD now standing as the 6th largest ETF in the US with $80 billion in assets, one has to wonder if there’s a possibility of it becoming even larger. For Nadig, absolutely.
“GLD has that name brand recognition,” Nadig notes. “Many people look at GLD as being Gold. I don’t see any reason to expect this to go in any other direction. Gold still has that safe haven quality people are looking at. We all know we have a tumultuous six months ahead of us. I don’t really see anything getting in the way of gold here.”
Watch Dave Nadig and Chris Hempstead Talk Gold on ETF Edge:
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