Topic: ETFs

ETF Stocks: Precious metal ETFs to hold

precious metal etfs

Precious metal ETFs have largely centred on gold stocks. We continue to see the outlook for that precious metal as positive, and for aggressive investors who want to hold precious metal ETFs, we have two of them below.

The price of gold has been on an upwards trajectory since it dropped to $1,050 U.S. an ounce in December 2015. It’s now about 62% higher . Still, that’s below the previous peak of $1,897 per ounce reached in September 2011. Meantime, gold stocks have also started to perform better after a prolonged slump. A broad index of global gold miners is up by 170% since January 2016.

Gold bears point to very limited industrial use for gold as well as the fact that physical holdings produce no income for investors. Besides, they argue, the vast quantities of gold held by central banks create an overhang as it may be dumped on the market. That would depress the price.

Nonetheless, gold has historically played a stabilizing role in investment portfolios during market upheavals. It can also provide a hedge against inflation and a drop in the U.S. dollar. And now, with government debt levels pushed up to uncomfortable levels and central banks in full money printing mode, gold may see much higher gain.

ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (Toronto symbol XGD; aims to mirror the performance of the S&P/TSX Global Gold Index; it’s made up of 36 gold stocks from Canada and around the world. The ETF began trading on March 23, 2001. Investors are charged an acceptable 0.61% MER.

The fund’s top holdings include Newmont Goldcorp, 18.2%; Barrick Gold, 17.2%; Franco-Nevada Corp., 10.6%; Agnico-Eagle Mines, 8.2%; Kirkland Lake Gold, 4.6%; AngloGold Ashanti, 4.5%; and Royal Gold, 4.4%.

The ETF cuts risk for investors by focusing on politically stable mining jurisdictions: Canadian firms comprise 64.0% of the fund’s assets, followed by the U.S. (23.8%), South Africa (10.2%) and Peru (2.0%).

ETFs: Here’s what silver investors should consider buying

GLOBAL X SILVER MINERS ETF (New York symbol SIL; tracks the Solactive Global Silver Miners Index.

Set up in April 2010, the ETF follows 23 international firms that mine, refine or explore for silver. The fund has 51.2% of its assets in Canada. That’s ahead of Russia (14.1%), South Korea (13.9%), Mexico (8.3%), the U.S. (6.9%), and Peru (5.6%). Investors in the Global X Silver Miners ETF face an acceptable MER charge of 0.65%.

The quality of the fund’s top holdings should drive your future gains: Wheaton Precious Metals represent 23.2% of its assets; Polymetal International, 12.1%; Korea Zinc, 8.3%; Pan American Silver, 5.5%; Coeur Mining, 5.3%; SSR Mining, 4.9%; First Majestic Silver, 4.8%; Buenaventura, 4.8%; Hecla Mining, 4.4%; and Fresnillo plc, 4.2%.

Recommendation in Canadian Wealth Advisor: iShares S&P/TSX Global Gold Index and Global X Silver Miners ETF are buys.

For our view on how to make the best selection in individual gold stocks, read 9 ways to spot the best gold stocks with the lowest risk.

For a recent report on how to judge whether an ETF is right for you, read When an ETF investment is the right choice.

How attractive are precious metal ETFs as an investment compared to individual gold or silver stocks?

This post was originally published in 2014 and is updated regularly.


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