For investors who want exposure to gold and silver, these two funds provide access to leading miners without the downside of directly holding the precious metals.
In 2011, gold shot up to a high of $1,950 U.S. an ounce, and silver reached a peak of $48.48.
Gold prices then fell steadily, dropping to $1,050 in December 2015 for the first time since early 2010. That month, silver also declined to a five-year low of $13.65 an ounce.
Each metal has since moved up to today’s price of $1,358 for gold and $20.39 for silver. That reflects higher commodity prices. It also reflects the belief that slow global economic growth will keep interest rates low. That raises the prospect of higher inflation. Political uncertainty in Europe, the U.K. and the U.S. also raises gold’s appeal for investors.
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However, growth-promoting policies, which gained a following in the 2014 U.S. mid-term elections, may continue no matter who wins this year’s presidential race. This could stimulate the U.S. economy enough to eventually push interest rates higher. If that happens, gold and silver would likely drop.
Still, if you want to hold gold or silver stocks, these two ETFs offer top-quality global miners.
ISHARES S&P/TSX GLOBAL GOLD INDEX FUND (Toronto symbol XGD; buy or sell through brokers; ca.ishares.com) aims to mirror the performance of the S&P/TSX Global Gold Index, which is made up of 35 gold stocks from Canada and around the world. The ETF began trading on March 23, 2001. Its MER is 0.61%.
The fund’s top holdings are Barrick Gold at 14.0%; Newmont Mining, 12.8%; Goldcorp, 8.2%; Franco-Nevada, 7.5%; Agnico-Eagle Mines, 7.1%; Randgold Resources (ADR), 5.9%; AngloGold Ashanti (ADR), 4.8%; and Kinross Gold, 3.5%.
Recommendation in Canadian Wealth Advisor: HOLD
ETFs: Canadian firms comprise 53.3% of Silver Miners ETF
GLOBAL X SILVER MINERS ETF (New York symbol SIL; buy or sell through brokers; www.globalxfunds.com) tracks the Solactive Global Silver Miners Index.
That index began trading in April 2010 and includes 21 international firms that mine, refine or explore for silver. It was developed by Germanybased Structured Solutions AG.
Canadian firms make up 53.3% of the fund’s holdings, but it also includes miners in the U.S. (21.1%) and Mexico (18.6%). Its MER is 0.65%.
The ETF’s top holdings are Fresnillo plc at 12.7%; Silver Wheaton, 11.7%; Pan American Silver, 10.9%; Tahoe Resources Inc. at 11.5%; Coeur Mining, 6.5%; First Majestic Silver, 6.0%; Hecla Mining, 5.6%; Industrias Penoles, 5.3%; Alamos Gold, 4.3%; and Polymetal International, 4.3%.
I think that political uncertainty and volatility in the market will actually benefit gold, and, yes, silver to a lesser degree. That may be short-lived, however, regardless of the electoral outcome.
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These two are a good way to buy gold and silver. But gold (and silver to a lesser degree) will probably stay volatile until after the US election.
I think that political uncertainty and volatility in the market will actually benefit gold, and, yes, silver to a lesser degree. That may be short-lived, however, regardless of the electoral outcome.