Gold logged in the biggest weekly gain in more than two years, rising more than 5%. The gains were driven by signs of cooling inflation, which has sparked hopes that the Fed might slow down the pace of its interest-rate increases.
Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. A slow down in the pace of rate hikes will provide some support to the yellow metal. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market.
Given this, we highlight five gold mining ETFs that led the market higher last week. These are Sprott Junior Gold Miners ETF (SGDJ – Free Report) , US Global GO GOLD and Precious Metal Miners ETF (GOAU – Free Report) , iShares MSCI Global Gold Miners ETF (RING – Free Report) , Market Vectors Gold Mining ETF (GDX – Free Report) and Global X Gold Explorers ETF (GOEX – Free Report) .
Inflation in the United States moderated somewhat as the consumer price index rose 7.7% annually in October after rising 8.2% at the end of September, while the core consumer price index, which strips out volatile components such as food and energy prices, climbed 6.3% year over year, down from 6.6% in September (read: 4 Sector ETFs to Win from October Inflation Data).
The data triggered a sharp fall in the U.S. dollar, which saw its biggest two-day drop in almost 14 years, making gold more appealing for other currency holders. Markets are now pricing in a 71.5% chance of a 50-bps rate hike at the Fed’s December meeting, up from around 50/50 chance a week ago. Fed fund futures are now pricing in a 90% chance of a 50-bps rate hike at the Fed’s December meeting.
Additionally, growing recession fears and the chaos in cryptocurrencies are driving investors toward gold, as it is considered a safe haven.
Sprott Junior Gold Miners ETF 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 44 stocks in its basket, with Canadian firms making up the largest share at 42.8%, followed by Australia (42%) and Turkey (7.1%).
Sprott Junior Gold Miners ETF has amassed $91.6 million in its asset base and trades in a lower volume of around 20,000 shares a day. It charges 50 bps in annual fees from investors (read: Will Gold ETFs Continue to Shine?).
US Global GO GOLD and Precious Metal Miners ETF provide investors with access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It tracks the U.S. Global Go Gold and Precious Metal Miners Index, holding 29 stocks in its basket. Canada takes the lion’s share at 51%, followed by South Africa (18.7%), the United States (13%) and Australia (10.6%).
US Global GO GOLD and Precious Metal Miners ETF has amassed $74.6 million in its asset base and charges 60 bps in fees per year. It trades in a volume of 24,000 shares per day on average.
iShares MSCI Global Gold Miners 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 40 securities in its portfolio. Canadian firms take half of the portfolio, while the United States takes the next spot at 20.4% share. RING is the cheapest choice in the gold mining space, charging just 39 bps in fees and expenses.
iShares MSCI Global Gold Miners ETF has been able to manage assets worth $364.6 million and trades in a good volume of 101,000 shares per day.
Market Vectors Gold Mining ETF is the most popular and actively traded gold miner ETF with AUM of $11 billion and an average daily volume of around 27 million shares. It follows the NYSE Arca Gold Miners Index, holding 49 stocks in its basket. Canadian firms account for about 43% of the portfolio, while the United States (18.3%) and Australia (12.8%) round off the top three.
Market Vectors Gold Mining ETF charges 51 bps in annual fees.
Global X Gold Explorers ETF provides exposure to companies involved in the exploration of gold deposits and tracks the Solactive Global Gold Explorers & Developers Total Return Index. It is home to 52 stocks, and Canadian firms dominate the fund’s return at 47.4%, followed by Australia (22.1%) and the United States (9.7%).
Global X Gold Explorers ETF is unpopular and illiquid, with AUM of $31.5 million and an average daily volume of 5,000 shares. The expense ratio comes in at 0.65% (read: October Marks Best Month for Value ETFs Since 1978: Top Funds).