Getting gold exposure without having to invest in the precious metal itself is possible. Gold miners can offer a way to do so, particularly if investors want a contrarian play as the dollar gains and interest rates rise.
Speaking of which, aggressive interest rate hikes have been pushing the greenback higher and gold lower. As such, miners have been feeling the downward pressure from falling gold prices as of late.
“Gold mining stocks appear very unloved at the moment,” a Kitco News report by Frank E. Holmes noted. “As measured by the NYSE Arca Gold Miners Index, gold equities fell 18.5% year-to-date through the end of July, underperforming both the underlying metal and the S&P 500. From the index’s recent high set in August 2020, gold miners are off about 42.5%, putting them deep in bear territory.”
However, inflation fears have been morphing into recession fears as the Fed continues to hike rates, potentially to the detriment of economic growth. If a recession hits, gold could once again be sought after as a safe haven play, making gold miners attractive again.
“When an asset class gets to be this overlooked by investors, I believe the time becomes ripe for contrarians to consider making a move,” Holmes wrote.
Investors looking to make a contrarian play may want to look gold miners as an option when looking for alternatives outside of gold itself. Gold miner stocks are an option, but there are also all-inclusive alternatives available in exchange traded funds (ETFs).
A Gold Mining Option
One ETF to consider is the Global X Gold Explorers ETF (GOEX). 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, which 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 gives investors:
- Targeted exposure: GOEX is a targeted play on gold exploration.
- Appeal of gold: Historically, investors have turned to gold as a potential store of value — particularly during periods of volatility.
- ETF efficiency: In a single trade, GOEX delivers efficient access to a basket of companies involved in the exploration of gold.
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