Gold ETFs started 2014 on a positive note after a dismal 2013 as
net ETF outflows in gold were zero in contrast to the 177 tons of
outflows witnessed in the year-ago quarter. Last year, gold ETFs
had suffered massive outflows as the slump in prices tarnished its
image as a gold haven, thereby affecting demand for gold ETFs.
In the first quarter, tensions in Ukraine and concerns over the
global economy made investors flock to gold as a risk diversifier,
which resulted in positive monthly inflows to ETFs in February, for
the first time in over a year. This was repeated in March. Extreme
low valuation also opened up buying opportunities for gold ETFs.
Will Gold ETFs continue to shine?)
A See-Saw Ride for Prices in 2014 So Far
After a lackluster 2013, which dealt a blow to the 12-year bull run
for gold, the yellow metal somewhat regained its prominence in
2014. Gold started 2014 at $1,223 per ounce and rose steadily,
thanks to the growing demand for jewelry in China, the largest
consumer, during the Lunar New Year. In mid March, gold attained a
six-month high of $1,388 per ounce. The 13% gain since the start of
the year was stoked by Ukraine worries, fears of slowdown in China
and weak U.S. economic data that drove investors to the bullion as
a safe haven.
However, the bubble soon burst with
again falling below $1,300 per ounce in late March on
stronger-than-expected U.S. economic data. After see-sawing on
either side of $1,300, gold prices plummeted to around $1,250 per
ounce in late May. Positive U.S. economic indicators boosted the
dollar and pushed the gold price in the opposite direction.
Investors took the opportunity to shift from gold and flock to the
stock markets instead, sending New York indices to record
territory. Gold's safe-haven status during times of political
turmoil was diluted by waning concerns over Ukraine. Moreover,
lower demand in China as well as India in contrast to the
unprecedented demand for jewelry, gold bars and coins in the wake
of low prices last year also kept prices in check. (Read:
4 Great Reasons to buy commodity ETF Now
Iraq, India and China Hold the Key to Current Gold
In June, with Ukraine gone from the headlines, gold prices and
related ETFs continued to gain ground amid fresh bouts of
geopolitical tensions in Iraq. Investors were also cautious after
U.S. President Barack Obama warned of a possible military
intervention in Iraq. All eyes will now be on the Middle East and
if the situation worsens, gold will once again regain its safe
haven status and prices could move up. Furthermore, focus will also
be on the U.S. Federal Reserve's monetary policy statement and Fed
chief Janet Yellen's press conference on June 18.These are also
expected to influence gold prices.
India has also slashed import duties in view of the weakness in
bullion prices. This will further give a boost to gold. India had
curbed bullion imports last year, including a record 10% duty on
overseas purchases to address the high current account deficit.
Gold is the second largest import item for India after petroleum.
Bear Market for India ETFs following Modi's
The easing of restrictions and the upcoming wedding season would
again stir up gold demand in the second largest gold consuming
nation. Even though strength in the U.S. and European equity
markets will distract gold investors, gold prices will get a solid
thrust from retail demand for gold, particularly in India and
Moreover, production pullbacks in response to lower gold prices
last year and mining development delays could lead to a supply
crunch. If so, gold prices would be pushed higher. Additionally,
the Fed is committed to keeping interest rates low for some time.
Thus, even with tapering in place, gold might regain its luster for
ETFs to Tap the Sector
Below, we highlight the ETFs in this sector in greater detail for
those seeking to make a gold-mining ETF play at this time.
Market Vectors Gold Miners ETF
GDX is one of the popular gold ETFs on the market today with asset
under management of $7.23 billion and a trading volume of roughly
28,045,308 shares a day. The fund charges an expense ratio of 53
basis points a year with a dividend yield of 0.79%.
The ETF was formed on May 15, 2006, to track the NYSE Arca Gold
Miners Index. The Index provides exposure to publicly traded
companies worldwide that are involved primarily in gold mining,
representing a diversified blend of small, mid and
large-capitalization stocks. The fund holds 39 stocks in its
basket, with a concentrated approach in the top 10 holdings with
66.4% of the asset base invested in them.
Among individual holdings, top stocks in the ETF include Goldcorp
Barrick Gold Corporation
Newmont Mining Corporation
(NEM) with asset allocation of 13.44%, 13.12% and 7.86%,
Market Vectors Junior Gold Miners ETF
Another popular choice in the gold miners ETF market is GDXJ, a
fund tracking the Market Vectors Junior Gold Miners Index, which
provides exposure to small- and medium-capitalization companies
that generate at least 50% of their revenues from gold and/or
silver mining. The product has $1.73 billion in assets with a daily
volume of 6,490,120 shares. It charges 57 basis points in annual
The fund has a total holding of 65 stocks with approximately 96%
weightage in small cap companies and the rest in mid caps. It is
widely spread with none of the companies holding more than 5.04% of
assets. SEMAFO Inc.,
Primero Mining Corp.
Torex Gold Resources Inc
(TXG.TO) occupy the top three positions in the fund with asset
allocation of 5.04%, 5.01% and 4.78%, respectively.
Global X Gold Explorers ETF
The fund seeks to match the performance and yield of the Solactive
Global Gold Explorers Index, which tracks companies actively
involved in gold exploration. Formed in November 2010, the ETF now
manages assets worth $37.65 million. With a daily volume of 68,280
shares per day, the fund charges 65 bps in annual fees.
It is spread across 21 small cap securities with the top 10
holdings comprising 60.31% of assets.
ATAC Resources Ltd.
Papillon Resources Limited
NovaGold Resources Inc.
(NG) command the top three positions in the basket representing
7.66%, 7.55% and 6.50% of net assets respectively.
iShares MSCI Global Gold Miners
The fund seeks investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI
ACWI Select Gold Miners Investable Market Index. This index
measures the equity performance of companies in both the developed
and emerging markets that derive the majority of their revenues
from gold mining. The index also includes companies that do not
hedge their exposure to gold prices.
The ETF has over $56.05 million in AUM and a daily volume of about
56,703 shares, while it is also a low-cost pick with expense ratio
of 39 basis points a year. It has a dividend yield of 1.32%.
The fund debuted in January 2012 and currently has 38 companies in
its basket, with the top 10 holding 73% of the assets. The top
stocks include Goldcorp, Barrick Gold Corporation and Newmont with
asset allocation of 17.06%, 16.53% and 9.86%, respectively.
PowerShares Global Gold & Prec Metals
PSAU was launched in September 2008 and has been designed to track
the NASDAQ OMX Global Gold & Precious Metals Index. It has a
trading volume of just 8,748 shares a day, but is a bit pricey as
it charges investors 75 basis points on an annual basis. The fund
fetches a dividend yield of 0.60%.
This fund has a total holding of 64 stocks. Among individual
holdings, Goldcorp, Newmont and Barrick Gold occupy the top three
positions with an asset share of 7.96%, 7.36% and 7.12%,
Global X Pure gold Miners ETF
The ETF is linked to the Solactive Global Pure Gold Miners Index,
which tracks the performance of the largest and most liquid gold
mining companies globally.
Formed in March 2011, the ETF has assets worth $3.94 million. With
a daily volume of more than 4,380 shares per day, the fund charges
59 bps in annual fees and has a dividend yield of 0.94%.
It is spread across 25 companies with the top 10 holding 54.07 % of
total net assets.
Sibanye Gold Limited
Detour Gold Corporation
(DGC.TO) and Centamin Egypt Gold hold the top three positions
representing 7.1%, 6.35% and 6.22% of the net assets, respectively.
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MKT VEC-GOLD MI (GDX): ETF Research Reports
MKT VEC-JR GOLD (GDXJ): ETF Research Reports
GLBL-X GOLD EXP (GLDX): ETF Research Reports
ISHARS-M GL GLD (RING): ETF Research Reports
PWRSH-GLBL GOLD (PSAU): ETF Research Reports
GLBL-X PGM (GGGG): ETF Research Reports
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