3 Gold Miners To Inflation-Proof Your Portfolio

It was another turbulent week for the major averages, with the S&P 500 (SPY) finding itself down 3%, extending its decline to the 20% mark. However, one sanctuary from the turbulence was the Gold Miners Index (GDX). Not only did the index not lose ground last week, but it gained 3%, and it is one of the few ETFs sporting a year-to-date gain. This continued relative strength combined with an undervalued industry group relative to historical levels suggests that this is a group worth keeping a close eye on for investors looking to inflation-proof their portfolios.

Gold Miners Index (GDX)

Source: TC2000.com

With inflation readings continuing to sit at multi-decade highs and the Federal Reserve maintaining its hawkish pivot, there are few places to hide in today's market. However, one asset that has historically done well in periods of negative real rates is gold (GLD), and one way to collect income with exposure to the gold price is through gold miners. The caveat, however, is that they must be trading at a deep discount to net asset value [NAV] and ideally out of favor. With more than 80% of miners trading at discounts to NAV and the industry group down nearly 40% from its Q3 2020 highs, it currently meets both requirements. Let's look at three names that make for solid buy-the-dip candidates: Continue reading "3 Gold Miners To Inflation-Proof Your Portfolio"

Three Gold Miners Trading At Deep Discounts

It’s been a rollercoaster ride for investors in the Gold Miners Index (GDX), with the index starting the year up 24% only to find itself back at a negative year-to-date return. While this has led to disappointment among many investors, I believe that this complete retracement is a gift, and it's worth noting that the GDX is still massively outperforming other sectors despite the sharp reversal. However, the key when investing in gold miners is to buy quality, and it rarely pays to bet on turnarounds from the lower-quality or lower-priced names in hopes that they will play catch-up. In this update, we'll look at three sector leaders worthy of a closer look.

Agnico Eagle Mines (AEM), Eldorado Gold (EGO), and Maverix Metals (MMX) all provide exposure to the gold price but have little in common from a cost, scale, and jurisdictional standpoint. All three operate in very different jurisdictions and have costs ranging from $400/oz to $1,300/oz. From a size standpoint, Maverix produces as little as ~40,000 gold-equivalent ounces [GEOs] per annum on an attributable basis. In contrast, Eldorado Gold produces over 400,000 GEOs per year, and Agnico produces over 3 million ounces of gold each year. However, all three companies share one key trait: enviable organic growth. In a sector that lacks growth stories, with most being inorganic, these companies do not need a higher gold price to significantly increase cash flow per share looking out to FY2025.

Beginning with Agnico Eagle Mines (AEM), the company is the 3rd largest gold producer globally and expects to produce 3.3 million ounces of gold in 2022 at all-in sustaining costs [AISC] between $1,000/oz to $1,050/oz. The company's 10+ mines are located in Canada, Australia, Finland, and Mexico, and the company has a large development that could add 700,000+ ounces per annum of production by 2030. Among the million-ounce producers, this jurisdictional safety is a rarity and is one reason that AEM is a favorite among funds, with 95% of production coming from Tier-1 ranked jurisdictions vs. Barrick Gold and Newmont at less than 60%, and Gold Fields at less than 50%. Continue reading "Three Gold Miners Trading At Deep Discounts"

Three Gold Miners To Buy On Dips

It’s been an ugly week for the major market averages, with the S&P 500 (SPY) continuing its violent decline from its Q1 highs. Prior to this week, the Gold Miners Index (GDX) was a sanctuary from the turbulence, but when the market heads past the 15% correction mark, few stocks are sheltered from the turbulence. While this has been painful for investors that chased miners in early Q2 near their highs, this is set up an excellent buying opportunity for patient investors. So let’s look at a few names in the GDX where the selling looks to be overdone:

GDX Gold Index

Source: TC2000.com

Over the past month, we’ve seen several gold miners slide more than 25% from their highs, and in many cases, these corrections are entirely justified. This is because several producers have weak balance sheets and high costs, making them very sensitive to weakness in the metal price and rising interest rates. However, when it comes to names like SSR Mining (SSRM), Yamana Gold (AUY), and Barrick (GOLD), which are sitting in net cash positions or expect to be net-cash positive by Q4, the recent pullback makes little sense, especially given that they’re some of the best operators sector-wide. Continue reading "Three Gold Miners To Buy On Dips"

Gold ETFs Setting New Highs

During the final days of July, Gold hit new all-time highs just below $2,000. The record run higher for the precious yellow metal, and for most of the precious metals has been in large part caused by the worldwide pandemic. As investors become nervous about the future, many find safe harbor in gold and other hard asset metals.

The bull market will likely continue as long as the pandemic and world economies struggle to gain traction. But, if we see a vaccine that protects against Covid-19, the price of gold will likely begin to fall as investors move back away from safe investments and back into equities, bonds, and other higher-risk – higher growth investments. When the rally ends, well, that’s, of course, the trillion-dollar question and one that I can’t help with. However, I can point you in the right direction of what to invest in regardless of which way you think the price is headed.

The big dog in the gold Exchange Traded Fund world is the SPDR Gold Trust (GLD). GLD has over $77 billion in assets under management and has been in existence since 2004. The fund charges a 0.4% expense ratio and has an average daily dollar amount volume of just over $1.76 billion, meaning it typically has liquidity. GLD tracks the gold spot price using gold bars held in vaults in London. This is an excellent option for anyone who wants the protection of gold but doesn’t want the hassle of buying actual gold bars.

The only big downside to GLD is that one share will cost you roughly $185. But there is a solution to that problem, and it’s called the SPDR Gold MiniShares Trust (GLDM). GLDM is essentially the same thing as GLD, but it holds 1/10th as much gold per share as GLD, and therefore each share costs less. As of this writing, GLD is $184.98 per share, while GLDM is $19.61 per share. GLDM tracks the spot price of gold the same as GLD, but it also has a lower expense ratio of just 0.18%. It also has much fewer assets under management of just $3.22 billion and therefore is less liquid for large orders. But again, if you want to place a large order, go with GLD. GLDM is designed for the small retail investor, not the large funds that need exposure to gold. Continue reading "Gold ETFs Setting New Highs"

Gold ETFs Setting New Highs

During the final days of July, Gold hit new all-time highs just below $2,000. The record run higher for the precious yellow metal, and for most of the precious metals, it has been in large part caused by the worldwide pandemic. As investors become nervous about the future, many find safe harbor in gold and other hard asset metals.

The bull market will likely continue as long as the pandemic and world economies struggle to gain traction. But, if we see a vaccine that really protects against Covid-19, the price of gold will likely begin to fall as investors move back away from safe investments and back into equities, bonds, and other higher-risk – higher growth investments. When the rally ends, well, that’s, of course, the trillion-dollar question and one that I can’t help with. However, I can point you in the right direction of what to invest in regardless of which way you think the price of gold is headed.

The big dog in the gold Exchange Traded Fund world is the SPDR Gold Trust (GLD). GLD has over $77 billion in assets under management and has been in existence since 2004. The fund charges a 0.4% expense ratio and has an average daily dollar amount volume of just over $1.76 billion, meaning it typically has liquidity. GLD tracks the spot price using gold bars held in vaults in London. This is an excellent option for anyone who wants the protection of gold but doesn’t want the hassle of buying actual gold bars. Continue reading "Gold ETFs Setting New Highs"