Gold Miner ETFs Are The Best Way To Play The Gold Bubble Of 2010
“As gold continues to shatter new highs, analysts and pundits have started to wonder if gold is peaking. But the reality is that gold has barely gotten going. Its 1980 peak of $875 is equivalent to $2,400 per ounce today – more than double the current price. And there’s nothing holding gold back from hitting those numbers. The Federal Reserve’s loose monetary policy has put the dollar under duress. The central bank has pumped more than $2 trillion into the U.S. economy since the financial crisis began over two years ago. It lowered the benchmark Federal Funds rate to a record low 0%-0.25% range and it has stepped up purchases of U.S. Treasuries and mortgage-backed securities. As a result, the dollar tumbled about 20% against the euro in the past year. The Dollar Index – which measures the greenback against the euro and five other currencies – fell to a 15-month low earlier this month. With the dollar in freefall, central banks and hedge funds have sought shelter in hard assets, particularly gold,” Martin Hutchinson Reports From Money Morning.
“Everything is pointing to the price of gold going higher,” said Mike Sander, an investment advisor at Sander Capital Advisors.
Hutchinson continues to say, “When Will the Bubble Pop? Consider the amount of money sloshing around the world right now – China’s $2.2 trillion in reserves, India’s $285 billion in reserves, all of the money in central banks throughout the Middle East. If all the serious money charges into gold and gold really gets going, you’ll see a tremendous spike in prices. But, everyone who says that gold will hit $2,000 in five years is wrong. It will be back down in 5 years. If it’s going to $2,000 – and almost every analyst thinks it will – it will get there in 2010. Everything will turn around when central banks start taking monetary policy seriously, and they won’t do that in a hurry. They won’t turn off the money taps until consumer inflation rises. But when inflation does rise, the central banks will react quickly and forcefully – driving up interest rates dramatically. And, suddenly, gold won’t seem so attractive anymore.”
“Gold’s bull run is a bubble, just like all the other bubbles. Except this is more of a bang than a bubble, because it’s taking place so quickly. So, keep an eye on inflation and those central banks and be prepared to get out of the bubble before it pops. The time to take advantage of gold’s historic rise is now… before prices come tumbling back down,” Hutchinson Reports.
One Of the best ways to play the gold bubble will be through gold miners ETFs. Gold miners benefit disproportionately from a rise in the price of gold, because their production costs are fixed. This means that miners are a more-leveraged way to play gold than the metal itself, particularly since surging speculative demand can increase mining companies’ Price/Earnings (P/E) ratios.
We have put together some details on two gold miners ETFs that will benefit through a more leveraged way to play the gold bubble of 2010. The gold miners ETF’s are the Market Vectors Junior Gold Miners ETF’s (GDXJ) and the Market Vectors Gold Miners ETF (GDX). See the details below:
The Funds (GDXJ) investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index (the “Junior Gold Miners Index”). For a further description of the Junior Gold Miners Index, see “Junior Gold Miners Index.”
| Fund Holdings of (GDXJ) as of 12/09 | |||||
| No. | Holding | Ticker | Shares | Market Value | % of net assets |
| 1 | Coeur d’Alene Mines Corp. | (CDE) US | 56,910 | $1,191,695.40 | 6.42% |
| 2 | Silver Standard Resources | (SSRI) US | 51,510 | $1,003,414.80 | 5.40% |
| 3 | New Gold Inc | (NGD) CN | 251,160 | $972,587.72 | 5.24% |
| 4 | Hecla Mining Co | (HL) US | 177,285 | $946,701.90 | 5.10% |
| 5 | Gammon Gold Inc | (GRS) US | 89,085 | $878,378.10 | 4.73% |
| 6 | Alamos Gold Inc | (AGI) CN | 80,610 | $808,060.57 | 4.35% |
| 7 | Silvercorp Metals Inc | (SVM) CN | 117,615 | $712,342.27 | 3.84% |
| 8 | Semafo Inc | (SMF) CN | 187,800 | $707,530.16 | 3.81% |
| 9 | European Goldfields Ltd | (EGU) CN | 95,100 | $648,543.09 | 3.49% |
| 10 | Golden Star Resources Ltd | (GSS) US | 175,590 | $598,761.90 | 3.22% |
| 11 | Northgate Minerals Corp | (NXG) US | 192,960 | $567,302.40 | 3.06% |
| 12 | Kingsgate Consolidated Ltd | (KCN) AU | 65,010 | $548,420.73 | 2.95% |
| 13 | Jaguar Mining Inc | (JAG) CN | 52,200 | $545,176.21 | 2.94% |
| 14 | San Gold Corp | (SGR) CN | 185,925 | $530,226.29 | 2.86% |
| 15 | Aurizon Mines Ltd | (ARZ) CN | 112,455 | $528,783.59 | 2.85% |
| 16 | Novagold Resources Inc | (NG) US | 97,935 | $509,262.00 | 2.74% |
| 17 | Andean Resources Ltd | (AND) CN | 229,485 | $503,424.58 | 2.71% |
| 18 | Gabriel Resources Ltd | (GBU) CN | 147,360 | $444,139.06 | 2.39% |
| 19 | Minefinders Corp | (MFN) US | 43,560 | $433,857.60 | 2.34% |
| 20 | Allied Nevada Gold Corp | (ANV) US | 38,055 | $428,499.30 | 2.31% |
| 21 | Ventana Gold Corp | (VEN) CN | 38,040 | $420,147.07 | 2.26% |
| 22 | Rubicon Minerals Corp | (RMX) CN | 99,240 | $411,744.96 | 2.22% |
| 23 | Great Basin Gold Ltd | (GBG) CN | 251,820 | $393,900.33 | 2.12% |
| 24 | Lake Shore Gold Corp | (LSG) CN | 92,505 | $355,567.89 | 1.91% |
| 25 | St Barbara Ltd | (SBM) AU | 1,032,395 | $343,436.08 | 1.85% |
| 26 | Kirkland Lake Gold Inc | (KGI) CN | 38,685 | $332,075.92 | 1.79% |
| 27 | Avoca Resources Ltd | (AVO) AU | 194,325 | $333,011.01 | 1.79% |
| 28 | Fronteer Development Group | (FRG) US | 79,110 | $328,306.50 | 1.77% |
| 29 | Romarco Minerals Inc | (R) CN | 245,175 | $327,383.28 | 1.76% |
| 30 | Medusa Mining Ltd | (MML) AU | 77,745 | $284,326.89 | 1.53% |
| 31 | Detour Gold Corp | (DGC) CN | 20,685 | $271,275.45 | 1.46% |
| 32 | Gold Wheaton Gold Corp | (GLW) CN | 759,960 | $217,452.43 | 1.17% |
| 33 | Dominion Mining Ltd | (DOM) AU | 55,260 | $202,474.00 | 1.09% |
| 34 | Real Gold Mining Ltd | (246 HK) | 127,500 | $194,484.35 | 1.05% |
| 35 | Colossus Minerals Inc | (CSI) CN | 37,230 | $187,135.39 | 1.01% |
| 36 | U S Gold Corp | (UXG) US | 61,875 | $167,681.25 | 0.90% |
| 37 | Avocet Mining Plc | (AVM) LN | 97,665 | $156,218.24 | 0.84% |
| 38 | Lingbao Gold Co Ltd-H | (3330 HK) | 210,000 | $81,009.51 | 0.44% |
The investment (GDX) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally normally invests at least 80% of its total assets in common stocks and American depositary receipts (ADRs) of companies involved in the gold mining industry. The fund is nondiversified.
| Fund Holdings of (GDX) as of 12/09 | |||||
| No. | Holding | Ticker | Shares | Market Value | % of net assets |
| 1 | Barrick Gold Corp | (ABX) | 18,718,639 | $783,749,414.93 | 14.49% |
| 2 | Goldcorp Inc | (GG) | 14,249,524 | $614,011,989.16 | 11.36% |
| 3 | Newmont Mining Corp | (NEM) | 9,475,288 | $470,353,296.32 | 8.70% |
| 4 | AngloGold Ashanti Ltd | (AU) | 6,999,199 | $304,045,204.56 | 5.62% |
| 5 | Lihir Gold Ltd | (LIHR) | 8,569,682 | $265,317,354.72 | 4.93% |
| 6 | Cia de Minas Buenaventura | (BVN) | 7,114,374 | $263,587,556.70 | 4.87% |
| 7 | Yamana Gold Inc | (AUY) | 21,130,631 | $259,484,148.68 | 4.80% |
| 8 | Randgold Resources Ltd | (GOLD) | 3,203,698 | $255,110,471.74 | 4.72% |
| 9 | Kinross Gold Corp | (KGC) | 13,436,964 | $252,883,662.48 | 4.68% |
| 10 | IAMGOLD Corp | (IAG) | 14,744,197 | $251,536,000.82 | 4.65% |
| 11 | Gold Fields Ltd | (GFI) | 16,291,819 | $229,714,647.90 | 4.25% |
| 12 | Agnico-Eagle Mines Ltd | (AEM) US | 3,748,931 | $223,736,202.08 | 4.14% |
| 13 | Eldorado Gold Corp | (EGO) | 16,025,187 | $207,205,667.91 | 3.83% |
| 14 | Silver Wheaton Corp | (SLW) | 13,420,202 | $199,692,605.76 | 3.69% |
| 15 | Harmony Gold Mining Co | (HMY) | 17,100,638 | $175,452,545.88 | 3.24% |
| 16 | Pan American Silver Corp | (PAAS) | 3,501,327 | $82,036,091.61 | 1.52% |
| 17 | Royal Gold Inc | (RGLD) | 1,636,283 | $81,715,973.02 | 1.51% |
| 18 | Coeur d’Alene Mines Corp. | (CDE) US | 3,026,689 | $63,378,867.66 | 1.17% |
| 19 | New Gold Inc | (NGD) | 15,532,015 | $59,176,977.15 | 1.09% |
| 20 | Silver Standard Resources | (SSRI) US | 2,878,399 | $56,071,212.52 | 1.04% |
| 21 | Hecla Mining Co | (HL) US | 9,493,058 | $50,692,929.72 | 0.94% |
| 22 | Gammon Gold Inc | (GRS) US | 4,993,219 | $49,233,139.34 | 0.91% |
| 23 | Seabridge Gold Inc | (SA) | 1,505,674 | $35,142,431.16 | 0.65% |
| 24 | Golden Star Resources Ltd | (GSS) US | 9,492,472 | $32,369,329.52 | 0.60% |
| 25 | Aurizon Mines Ltd | (AZK) | 6,375,413 | $30,219,457.62 | 0.56% |
| 26 | Northgate Minerals Corp | (NXG) US | 10,274,632 | $30,207,418.08 | 0.56% |
| 27 | Minefinders Corp | (MFN) US | 2,376,917 | $23,674,093.32 | 0.44% |
| 28 | Great Basin Gold Ltd | (GBG) | 13,386,929 | $20,883,609.24 | 0.39% |
| 29 | Nevsun Resources Ltd | (NSU) | 5,149,665 | $14,882,531.85 | 0.28% |
| 30 | Tanzanian Royalty Exploration | (TRE) | 3,603,954 | $12,469,680.84 | 0.23% |
| 31 | Cash | 6,655,296 | $6,655,380.14 | 0.12% | |
| 32 | Vista Gold Corp | (VGZ) CN | 1,705,026 | $4,569,469.68 | 0.08% |
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