How to Make Money with ETFs

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Topic: ETFs

Two ETFs hold the leading gold and silver stocks

Gold now trades at $1,209 U.S. an ounce and silver at $14.77. Those prices are well below the 2011 highs for both metals, but still above their 2015 lows.

Gold and silver have gained over the last couple years, helped by fears that growing government deficits will lower the value of global currencies. However, they have receded in recent months.

An improving U.S. economy and low unemployment led the U.S. Federal Reserve to raise interest rates three times in 2017 and twice so far in 2018, with another increase likely this month. That dampens the risk of a falling U.S. dollar and much-stronger inflation. Typically, both of those factors are needed to significantly boost demand for gold and silver.

However, if you want to hold precious metal stocks, these two ETFs invest in top-quality global miners with sound production, positive cash flow and strong prospects. 

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ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (Toronto symbol XGD; buy or sell through brokers; aims to mirror the performance of the S&P/TSX Global Gold Index; it’s made up of 44 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 include Newmont Mining, 15.0%; Franco-Nevada Corp., 10.5%; Barrick Gold, 10.0%; Goldcorp, 8.4%; Agnico-Eagle Mines, 7.5%; Randgold Resources (ADR), 5.3%; and Royal Gold, 4.2%.

Canadian companies comprise 66.3% of the ETF’s total assets, but the fund also holds miners that are based in the U.S. (20.0%), South Africa (6.3%), the U.K. (5.3%) and Peru (2.1%).

Recommendation in Canadian Wealth Advisor: iShares S&P/TSX Global Gold Index is a hold.

ETFs: More than 40% of silver ETF’s assets are in Canada

GLOBAL X SILVER MINERS ETF (New York symbol SIL; buy or sell through brokers; aims to track the Solactive Global Silver Miners Index.

Set up in April 2010, the ETF follows 24 international firms that mine, refine or explore for silver. The fund has 41.7% of its assets in Canada. That’s ahead of Mexico (15.8%), the U.S. (14.1%), Russia (13.2%), South Korea (10.6%) and Peru (4.6%). The ETF has an MER of 0.65%.

The fund’s top holdings include Polymetal International at 13.8%; Wheaton Precious Metals, 13.1%; Korea Zinc, 11.8%; Fresnillo plc, 9.8%; Pan American Silver, 5.2%; SSR Mining, 4.9%; Tahoe Resources, 4.7%; Hecla Mining, 4.6%; Coeur Mining, 4.3%; and Industrias Penoles, 4.3%.

Recommendation in Canadian Wealth Advisor: Global X Silver Miners ETF is a hold.

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