The PHLX Gold/Silver Index is up 7% on the year, making a case for strength in gold prices as inflation and geopolitics come into play. This paves the way for opportunities to play gold indirectly via gold exploration equities.
As mentioned, among the concerns is rising inflation. The U.S. Federal Reserve is on the path to hiking the federal funds rate, which is spurring a move towards safe haven assets like gold.
Another move towards gold is the ongoing situation on the Russian-Ukrainian border. An escalation to a full-fledged conflict between the two nations could spur higher demand for gold and other safe haven assets.
It’s a move that patient gold investors have been waiting on, given that the precious metal was caught in a sideways holding pattern for much of 2021. Recovery from the pandemic in 2021 gave investors more confidence to turn the risk dial-up and pour capital back into equities and other assets like cryptocurrencies.
A move higher for gold can also have a spillover effect for ancillary gold activities. That includes mining and exploration, which gives investors indirect exposure to strength in gold prices.
An ETF Worth Exploring
An indirect play on higher gold prices could open up strength for the Global X Gold Explorers ETF (GOEX). The fund gives investors targeted exposure to companies whose core business operations focus on gold exploration.
Per its fund description, GOEX seeks to provide investment results that generally correspond to the price and yield performance of the Solactive Global Gold Explorers & Developers Total Return Index. The index is a free float-adjusted, liquidity-tested, and market capitalization-weighted index designed to measure broad-based equity market performance of global companies involved in gold exploration.
GOEX also gives investors diversified exposure to ancillary gold services internationally. Looking at its country breakdown (as of January 31, 2021), Canada comprises the largest exposure (54.5%), with Australia (17.9%) and Britain (10.5%) rounding out the top three.
Based on AltaVista Research, the fund has a good price-to-earnings ratio of 14.91 so far in 2022. That’s backed up with a price-to-book value of 1.06, making the fund a prime value option.
For more news, information, and strategy, visit the Thematic Investing Channel.