India’s Gold Purchase Is Spicing Up The Market For The Gold ETF’s

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November 4, 2009 4:50pm ETF BASIC NEWS NYSE:GDX

gold-bull“Just when all eyes were focused upon China, along came India to spice up the gold market. With this week’s revelation that the International Monetary Fund sold 200


 tonnes of gold to India’s central bank during October (at prices averaging about $1,045 per ounce), an enormous weight has been lifted from the shoulders of the gold market. Notwithstanding the ever-present likelihood of significant volatility ahead, I believe this move has paved the road toward substantially higher gold prices in the months to come,” Christopher Barker Reports From The Fool.

“200 tonnes sounds like an enormous pot of gold, but we can use some comparisons to place the size of the transaction into context. At 6.43 million ounces, the purchase is approximately equivalent to one-half of intermediate miner Eldorado Gold’s (NYSE: EGO) 12.7 million ounces of total reserves. Popular gold bullion proxy SPDR Gold Shares (NYSE: GLD) reports holding 1,108 tonnes of gold as of Tuesday. Looking to the in-ground stashes of major miners, India’s new pile looks smaller still. Goldcorp (NYSE: GG) is sitting on reserves equating to seven times the size of India’ purchase, while leading producer Barrick Gold (NYSE: ABX) retains some 3,877 tonnes of unmined reserves,” Barker Reports.

“I continue to invest with a purely long-term perspective, and encourage Fools to maintain unfettered focus upon the broader picture. Simply stated, I reiterate my $2,000 price target for gold. The Market Vectors Gold Miners ETF (NYSE: GDX) has nearly doubled over the past year, so piling into miners indiscriminately is not advised,” Barker Reports.

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Here is a detailed look at the two ETF’s below:

The investment (GLD) seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.

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.

TOP 10 HOLDINGS (GDX) ( 67.60% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AGNICO EAGLE MINES (AEM) 4.7
ANGLOGOLD ASHANTI LT (AU) 5.91
BARRICK GOLD CP (ABX) 13.15
GOLD FIELDS LTD ADS (GFI) 4.88
GOLDCORP INC (GG) 11.64
IAMGOLD CORPORATION (IAG) 4.35
KINROSS GOLD CP (KGC) 5.71
Lihir Gold, Limited (LIHR) 4.38
NEWMONT MIN CP (HLDG (NEM) 8.54
YAMANA GOLD INC (AUY) 4.34

Chart for Market Vectors Gold Miners ETF (GDX)

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