After wrapping up its best annual performance in a decade, gold continued its solid run to start 2021. This is especially true against the backdrop of lower U.S. yields and surging coronavirus cases that has raised the appeal for the yellow metal as a great store of value and hedge against market turmoil.
Though the rollout of vaccines took some shine away from the yellow metal in recent weeks, surging coronavirus cases and the resultant fresh economic restrictions as well as runoff elections for two Senate seats in Georgia has again boosted demand for the safe haven. In fact, the yellow metal has become investors’ preferred asset class amid the COVID-19 pandemic (read:
ETFs to Watch Ahead of Georgia Senate Runoff
).
Additionally, rising inflationary expectations has bolstered the metal’s demand as a hedge against inflation. U.S. 10-year inflation expectations
topped 2%
for the first time since 2018. The massive liquidity injections by central banks across the globe in the post-vaccine world are expected to drive demand in the economy for various products and services.
Added to the strength is the weak U.S. dollar that made dollar-denominated assets attractive for foreign investors. Notably, the ICE U.S. Dollar Index, a measure of the unit against a basket of six major rivals, dropped 6.7% in 2020, representing the first annual drop since 2017 (read:
U.S. Dollar Sees First Drop Since 2017: ETFs & Stocks to Buy
).
Given the optimism and intense buying pressure on gold to start the New Year, investors have a long list of options, in both the ETF & stock world, to tap the metal’s rally. Below we have highlighted four from each of these worlds that have outperformed in 2020 and will likely to do so this year too:
Sprott Junior Gold Miners ETF
SGDJ
: Up 58.4%
This fund follows the Solactive Junior Gold Miners Custom Factors Index, which measures the performance of junior gold producers with the strongest revenue growth and junior exploration companies with the strongest stock price momentum. It holds 37 stocks in its basket with Canadian firms making the largest share at 41.4%, followed by Australia (34.2%) and the United States (8.2%). The fund has amassed $123.3 million in its asset base and trades in lower volume of around 29,000 shares a day. It charges 50 bps in annual fees from investors (read:
5 Best Small-Cap ETFs as Russell 2000 Tops S&P 500 YTD
).
Global X Gold Explorers ETF
GOEX
: Up 46.5%
The ETF provides exposure to companies involved in the exploration of gold and tracks the Solactive Global Gold Explorers & Developers Total Return Index. It is home to 49 stocks, and Canadian firms dominate the fund’s return at 52.8% followed by Australia (22.5%) and the United States (7.7%). The fund is unpopular and illiquid with AUM of $65.3 million and an average daily volume of 13,000 shares. Expense ratio comes in at 0.65%.
VanEck Vectors Junior Gold Miners ETF
GDXJ
– Up 54.2%
GDXJ focuses on small-cap companies that are involved primarily in the mining for gold and/or silver by tracking the MVIS Global Junior Gold Miners Index. Holding 92 stocks in its basket, Canadian firms dominate the fund’s portfolio at 46.7%, while Australia (20.9%) and South Africa (7.3%) round out the top three. The product has AUM of $6.3 billion and charges 53 bps in annual fees. It trades in heavy volume of around 7.6 million shares a day on average.
iShares MSCI Global Gold Miners ETF
RING
: Up 35.5%
This ETF offers exposure to companies that derive the majority of their revenues from gold mining. It follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 42 securities in its portfolio. Canadian firms take half of the portfolio, while the United States and South Africa round out the top three with double-digit exposure each. RING is the cheapest choice in the gold mining space, charging 39 bps in fees and expenses. The fund has been able to manage assets worth $486.2 million and trades in good volume of 217,000 shares per day (read:
Gold Mining ETFs in Focus on Endeavour-Teranga Merger Talks
).
New Gold Inc.
NGD
: Up 158.2%
This Zacks Rank #3 company is engaged in the development and operation of mineral properties. The strong performance is expected to continue given that it has a VGM Score of A and its earnings are expected to grow from zero cents to 21 cents this year.
Kinross Gold Corporation
KGC
: Up 71.6%
This Zacks Rank #3 (Hold) company is primarily involved in the exploration and operation of gold mines. It is poised to post substantial earnings growth of 26.6% for this year. The stock has a VGM Score of A. You can see
the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here
.
Barrick Gold Corporation
GOLD
: Up 34%
This Zacks Rank #3 company is the largest gold mining company in the world. Its earnings are expected to grow 20.6% for this year. The stock has a VGM Score of B.
Pretium Resources Inc.
PVG
: Up 12.2%
This Zacks Rank #3 company is engaged in the acquisition, exploration and development of precious metal resource properties in the Americas. It is expected to post substantial earnings growth of 119.7% for this year. The stock has a VGM Score of B.
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