Small miners can mean big returns in the gold mining space, and when prices rebound, investors may want to consider the Sprott Junior Gold Miners ETF (NYSEArca: SGDJ).
SGDJ tracks small cap gold miners, but weighs its components based on revenue growth and price momentum. The ETF focuses on price momentum, which helps identify leading junior gold miners driven by factors like new discovery, mine development, or joint ventures.
Stock fundamentals like cost deflation across the mining industry, share valuations below long-term averages, and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens. Importantly, many currency traders expect the dollar to remain lethargic this year.
SGDJ: A Wise Choice for the Gold Rebound
SGDJ provides investors with cost-efficient and pure exposure to this market segment by implementing production and revenue tests that other gold stock ETFs often lack.
For gold bugs, the good news is that some investors see value in gold ETFs and are buying these funds after the yellow metal’s recent decline.
Supporting the case for SGDJ, we may also continue to see multiple factors come into play to support the gold market in the coming months. For starters, economic expansion has historically been supportive of jewelry, technology, and long-term savings. Risk and uncertainty could further support safe-haven gold demand. The price of competing assets like bonds, currencies, and other assets may also influence investor attitudes toward gold. Lastly, capital flows, positioning, and price trends may ignite or dampen gold’s performance.
Some also point to a weakening U.S. dollar that could further support gold as a better store of wealth. The aggressive fiscal and monetary stimulus measures, along with a shift toward riskier assets, could weigh on the dollar. Since gold is priced in the greenback, a weak dollar makes it cheaper for foreign gold buyers.
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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.