"Gold gets dug out of the ground in Africa, or someplace. Then
we melt it down, dig another hole, bury it again and pay people to
stand around guarding it. It has no utility. Anyone watching from
Mars would be scratching their head." - Warren Buffett
The legendary investor is known for his antagonistic take on gold
as an investment option. Recently, gold has fallen from grace as an
investment option due to the slump in prices which has somewhat
tarnished its image as a gold haven. The words of Buffet never rang
so true. However, it remains to be seen whether gold can be written
off as having "no utility" as yet. (Read:
3 ETFs to play on Ukraine Turmoi
2013: A Nightmare Year for Gold
Overall, gold suffered a 28% drop during the year, exiting at
around $1,200 per ounce - the worst slump in more than three
decades. A multitude of factors - the Federal Reserve's taper or no
taper confusion, conflict in Syria and the U.S. government's
partial shutdown, and finally the taper call at year end - pushed
downhill through the year.
Things Look Better in 2014
So far in 2014, gold prices have ranged from $1,221 per ounce to
$1,372 per ounce, averaging $1,264 per ounce to date. The Fed's
announcement on Jan 29 to reduce asset purchases by another $10
billion a month to $65 billion kept the prices in check.
Dull economic numbers from the U.S. including lower manufacturing
PMI and the economy adding only 113K jobs in January, well below
expectations and home sales falling more than expected to an
18-month low in January led to the firming in prices.
Contrary to the 2013 lows, Gold mining ETFs have bounced back and
are trending higher. Extreme low valuation has opened up buying
opportunities for these ETFs. (Read:
The best gold mining ETF for 2014
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. (See all
Market Vectors Gold Miners ETF (
GDX is one of the popular gold ETFs on the market today with asset
under management of $7.2 billion and a trading volume of roughly
38,773,090 shares a day. The fund charges an expense ratio of 52
basis points a year.
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 35 stocks in its
basket, with a concentrated approach in the top ten holdings with
66.36% of the asset base invested in them.
Among individual holdings, top stocks in the ETF include
Barrick Gold Corporation
(ABX), Goldcorp and
Newmont Mining Corporation
(NEM) with asset allocation of 13.51%, 12.71% and 6.96%,
Gold ETFs in focus on recent surge
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 $1.45 billion in assets with a daily
volume of 2,820,597 shares. It charges 55 basis points in annual
fees. (See: Gold ETFs in focus on recent surge)
The fund has a total holding of 67 stocks with approximately 96%
weightage toward small cap companies and the rest in middle cap
companies. It is widely spread with none of the companies holding
more than 4.07% of assets.
McEwen Mining Inc. (MUX)
China Gold International Resources Corp Ltd
(CGG.TO) occupy the top three positions in the fund with asset
allocation of 4.07%, 3.92% and 3.87%, 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 Nov 2010, the ETF now manages assets worth $32.8 million.
With a daily volume of 35,816 shares per day, the fund charges 65
bps in annual fees.
It is spread across 22 small cap securities with the top ten
holdings comprising 56.2% of assets.
ATAC Resources Ltd.
Rubicon Minerals Corporation (RBY)
Continental Gold Limited (CNL.TO)
command the top three positions in the basket representing 6.85%,
6.72% and 5.75% of the 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 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 $50.4 million in AUM and a daily volume of about
53,394 shares, while it is also a low-cost pick with expenses of 39
basis points a year. It has a dividend yield of 1.20%.
The fund debuted in Jan 2012 and currently has 38 companies in its
kitty, with the top 10 holding 75% of the assets. The top stocks
include Barrick Gold Corporation, Goldcorp, and Newmont with asset
allocation of 17.85%, 16.7% and 8.99%, respectively.
PowerShares Global Gold & Prec Metals (
PSAU was launched in Sep 2008 and has been designed to track the
Global Gold & Precious Metals Index. It has a trading volume of
just 10,708 shares a day, but is a bit pricey as it charges
investors 75 basis points on an annual basis. The fund represents a
dividend yield of 0.45%.
This fund has a total holding of 65 stocks. Among individual
holdings, Goldcorp, Barrick Gold and Newmont occupy the top three
positions in the fund with an asset share of 8.21%, 8.19% and
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 Mar 2011, the ETF has assets worth $3.14 million. With a
daily volume of more than 5,923 shares per day, the fund charges 59
bps in annual fees and has a dividend yield of 0.92%.
It is spread across 24 companies with the top 10 companies holding
57.68% of the total net assets.
Sibanye Gold Limited
(SBGL), Centamin Egypt Gold and AngloGold Ashanti Ltd. (AU) hold
the top three positions representing 9.53%, 7.02% and 5.99% 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 PGM (GGGG): ETF Research Reports
GLBL-X GOLD EXP (GLDX): ETF Research Reports
PWRSH-GLBL GOLD (PSAU): ETF Research Reports
ISHARS-M GL GLD (RING): ETF Research Reports
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