There’s Still Time to Catch a Ride With Gold Miner ETFs
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With weakening labor data, the ongoing U.S. shutdown, and a softening dollar, gold demand seems poised to not slow down any time soon.
There are plenty of ways for advisors and investors to capitalize on the ongoing gold craze. Sure, they could take a more traditional approach and invest in gold futures, gold ETFs, or physical gold itself. However, investing in gold miners could offer a particularly potent use case as well.
As one would expect, gold miners are in an excellent position to benefit from the rising cost of gold. When the price of gold goes up, miners can potentially leverage this to ramp up revenue to the point that they outpace traditional equity strategies.
However, the price of gold has been on the upswing for the last few months now. As such, some advisors and investors wonder if it’s too late to capitalize on the gold mining opportunity.
“The lack of significant flows into gold mining ETFs suggests the trade isn’t overcrowded,” noted Steven Schoffstall, director, ETF product management at Sprott Asset Management USA. “We haven’t seen substantial inflows over the past 18 months. Before last December, mining stocks were trading in strong consolidation patterns. This attracted deep-value contrarian investors, who aren’t mainstream and don’t represent the majority of investors. In our view, gold miners are returning to vogue as their balance sheets improve with higher gold prices. They’re operating much differently than they were in the past bull market.”
SGDM’s Take on Gold Miner Exposure
The Sprott Gold Miners ETF (SGDM) can help advisors and investors gain focused access to the gold mining industry. To help do so, the fund is benchmarked to the Solactive Gold Miners Custom Factors Index. This index focuses on gaining exposure to larger gold miners with strong cash flow, revenue growth, and low debt to equity.
Focusing on gold miners with such strong fundamentals can help SGDM continue to capitalize on growing gold demand. These leading companies may be in pole position to drive portfolio returns as investors continue to flock to gold.
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