Gold Exposure a Common Choice in Uncertain Times

by Nick Peck of VettaFi, 9/9/23

For most of this year, the financial world has dealt with high levels of uncertainty. This has come from several different areas, including inflation. The Federal Reserve will meet again in the coming weeks to discuss this issue, though its course of action with regard to interest rates is not clear.

Is Now the Time to Invest in Gold?

Now could be an ideal time to hedge against the unpredictability investors may continue to face in 2023. Many investors are starting to look for ways to diversify their portfolios and protect their wealth. One way investors have done so in the past is through investing in gold.

As Todd Rosenbluth, head of research at VettaFi, explained, “During times of economic uncertainty, many advisors turn to commodities like gold. Gold can be a safe haven as it retains its value during inflationary times and has tangible value. When the stock market has sold off, gold has provided diversification benefits.”

VanEck offers a trio of ETFs that give exposure to physical gold and gold mining companies.

Gold Mining ETFs

The $11.8 billion VanEck Gold Miners ETF (GDX) is the largest gold miners ETF currently trading. GDX tracks the NYSE Arca Gold Miners Index which includes some of the largest companies in the gold mining space. Its largest holdings include Newmont Corp (9.85%), Barrick Gold Corp. (8.92%), and Franco Nevada Corp. (8.69%). However, ETFs investing in gold miner stocks are taking on general equity risk and specifically the risks faced by all mining companies.

VanEck also offers the VanEck Junior Gold Miners ETF (GDXJ) which tracks the MVIS Global Junior Gold Miners Index that follows small-cap companies in the gold and silver mining space. The company’s three largest holdings are Kinross Gold Corp. (7.86%), Alamos Gold Corp. (6.88%), and Pan America Silver Corp (6.67%). GDXJ has $4 billion in assets under management. Like GDX, GDXJ has equity risk, but it also has small-cap risk specifically.

Both funds are over 10 years old and have similar expense ratios with GDX being one basis point cheaper with an expense ratio of 0.51%.

A Physical Gold ETF

For investors not looking to invest in gold mining companies VanEck also offers the VanEck Merk Gold Trust (OUNZ). The fund tracks the LBMA Gold Price PM Index, which is the index underlying several of the other physical gold ETFs on the market. Unlike investors in other physical gold ETFs, OUNZ’s investors can redeem their shares in the ETF in exchange for actual physical gold if they decide to do so. The fund has close to $730 million dollars in AUM and an expense ratio of 0.25%. Although physical gold ETFs like OUNZ have no equity risk, they also do not offer income via dividends.

VanEck Gold ETFs Performance

Data from LOGICLY indicates in the last year GDX performed the best out of the three, posting a 23.60% return with GDXJ not far behind with a 21.70% return. OUNZ has posted a 13.04% return during that time frame. When looking at how these funds have performed in the past five years GDX performed the best with a 10.97% return and OUNZ had the second-highest return with 9.61%. GDXJ posted a 6.25% return in that time frame.

Ultimately, gold traditionally has been a favored asset among investors looking to preserve their wealth or hedge against inflation. The trio of ETFs from VanEck allows investors to gain exposure to gold directly or indirectly.

For more news, information, and analysis, visit the Beyond Basic Beta Channel.

Originally published on ETFTrends.com on September 6, 2023.

A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our most recent white papers.

Gold Exposure a Common Choice in Uncertain Times

Is Now the Time to Invest in Gold?

Gold Mining ETFs

A Physical Gold ETF

VanEck Gold ETFs Performance

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