Generally, we recommend that you focus your gold investing on mining stocks and avoid buying gold bullion and gold coins. Here are two ETFs that offer top-quality global miners and low MERs.
In 2011, gold shot up to a high of US$1,950 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 the recent price of $1,218 for gold and $16 for silver. The gains largely reflect higher commodity prices overall as well as the belief that slow global economic growth will keep interest rates low. That raises the prospect of higher inflation.
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 push interest rates higher. If that happens, gold and silver would likely stay low.
Still, if you want to hold gold or silver stocks, these two ETFs offer top-quality precious metals global miners.
Diverse global gold mining portfolio
iShares S&P/TSX Global Gold Index ETF (TSX: XGD). This ETF 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 as of May 31 included Barrick Gold Corp. (TSX: ABX) at 15%; Newmont Mining Corp. (NYSE: NEM), 13.2%; Goldcorp Inc. (TSX: G) at 10.7%, Franco-Nevada Mining Inc. (TSX: FNV) at 8.6%; Agnico-Eagle Mines Ltd. (TSX: AEM) at 7.6%; AngloGold Ashanti ADR (NYSE: AU) at 4.2%, Randgold Resources ADR (NASDAQ: GOLD) at 6%, and Kinross Gold Corp. (TSX: K) at 4.1%.
Recommendation in our Canadian Wealth Advisor newsletter: Hold.
Silver holdings include Hecla, First Majestic
Global X Silver Miners ETF (NYSE: SIL). This ETF tracks the Solactive Global Silver Miners Index, which includes 21 international firms that mine, refine, or explore for silver. It was developed by Germany-based Structured Solutions AG.
Canadian firms make up 50.5% of the fund’s holdings, but the portfolio also includes miners in the U.S. (22.0%) and Mexico (21.0%). Its MER is 0.65%.
The ETF’s top holdings as of May 31 include Pan American Silver Corp. (NASDAQ: PAAS), 12.1%, Silver Wheaton Corp. (Canada) (NYSE: SLW) at 11.1%, Fresnillo PLC (LON: FRES) at 11.1%, Tahoe Resources Inc.(TSX: THO) at 11%, First Majestic Silver Corp. (TSX: FR) at 5.5%; Hecla Mining Corp. (NYSE: HL) at 5.4%, Polymetal International PLC (LON: POLY) at 5.2%, and Industrias Penoles, SAB de CV (MEX: PE&OLES) at 5.1%.
Recommendation in our Canadian Wealth Advisor newsletter: Hold.
Courtesy Fundata Canada Inc. © 2016. Patrick McKeough is a professional investment analyst and portfolio manager. He is the host of TSINetwork.com, where this article first appeared (http://www.tsinetwork.ca/?p=95306). Investments mentioned are not guaranteed and carry risk of loss.
