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Grab These ETFs & Stocks on Gold Rush

Sanghamitra Saha

Gold prices are hovering around a six-year high currently and may hit more highs in the coming days. After recording the best monthly gain in June since February 2016, gold prices are set to rally in July too. A subdued greenback amid talks of a Fed rate cut and geopolitical tensions has been propelling the yellow metal higher (read: Gold Mining Tops in June: 5 Best ETFs, Stocks).

 In fact, a dovish Powell testimony boosted SPDR Gold Shares GLD by about 1.6% on Jul 10, 2019. Gold mining ETFs that act as leveraged plays on the underlying metal soared higher. VanEck Vectors Gold Miners ETF GDX was up 2.1% on Jul 10.

Fed to Turn More Dovish?

Despite a solid jobs report for the month of June and signs of truce in the U.S.-China trade war, Fed chief Powell said, “uncertainties about the outlook have increased in recent months.” He indicated economic slowdown in several international economies which has a spiral effect on the U.S. economy. Trade developments, the federal debt ceiling and Brexit could derail U.S. economic growth. And the Fed especially appeared worried about soft U.S. inflation.

That said, we would like to note that Powell did not indicate any time frame or extent of possible monetary easing. But the market is pricing the move. At the current level, according to CME FedWatch tool, there is a 54.3% chance of a 50-bp rate cut in the Sep 18 meeting, followed by a 28.5% probability of 25-bp rate cut and 17.2% likelihood of a 75-bp rate cut, at the time of writing.

Gold: Great Bet for 2H

Still, the second half of the year looks bright for gold investing. Gold may even touch $1550 (from the current level of $1422) in the next few months, per an analyst. Even if the Fed doesn’t cut rates, it would at least not hike the rate. So, overall easy policy would keep the dollar strength at check and boost gold prices.

Of late, geopolitical tensions between Iran and the United States flared up after officials from both countries said Iran downed a U.S. military drone near the Strait of Hormuz. In any case, both parties have been at loggerheads for about a year. Most recently, President Donald Trump announced that the United States will levy "major" incremental sanctions on Iran in order to prevent it from procuring nuclear weapons. Such geopolitical tension is another tailwind for gold rally (read: Iran Downs U.S. Drone: Sector ETFs & Stocks to Gain).

Despite economic weakness, the broader market is a bit overvalued. So, if the markets correct themselves any time soon, gold prices may gain on safe-haven appeal (read: 5 ETF Strategies to Win in a Pricey Market).

Central banks’ gold buying is yet another strength. Some of these contributed to a 7% rise in global gold demand in the first quarter from a year earlier, according to the World Gold Council, published on Financial Times. Russia was the biggest buyer during the period, followed by China. The momentum carried on in the second quarter too. Poland leads the league in June purchases and became the top holder in central Europe. The Peoples Bank of China boosted reserves for a seventh month in June. Last year, central banks bought 651.5 tons, up 74% year over year, per the World Gold Council data in January. Official sector purchases could touch 700 tons this year.

ETF Bets

Against this backdrop, investors can bet on gold mining ETFs. The below-mentioned funds are trading around a 52-week high and could hit more highs ahead.

ALPS Sprott Junior Gold Miners ETF (SGDJ)

The underlying Sprott Zacks Junior Gold Miners Index looks to track the performance of small-capitalization gold companies whose stocks are listed on major U.S. and Canadian exchanges. The fund charges 57 bps in fees.

U.S. Global GO GOLD And Precious Metal Miners ETF (GOAU)

The underlying U.S. Global Go Gold and Precious Metal Miners Index consists of the common stock or ADRs of Precious Metals Companies across the globe that earn at least 50% of their aggregate revenues from precious metals through mining or production; or owning royalties or production streams. It charges 60 bps in fees.

iShares MSCI Global Gold Miners ETF RING

The underlying MSCI ACWI Select Gold Miners Investable Market Index measures the equity performance of comps in both developed & emerging markets that derive the majority of their revenues from gold mining. The fund charges 39 bps in fees.

Stock Picks

Investors can also play a few top-ranked gold mining stocks. This is especially true given that the gold mining industry comes from a top-ranked Zacks industry (top 12%).

Royal Gold Inc. (RGLD)

The company acquires and manages precious metals royalty and stream interests, with a primary focus on gold.

Franco-Nevada Corporation (FNV)

Franco-Nevada Corporation is a gold focused royalty and stream company with additional interests in platinum group metals and other resource assets. The stock has a Zacks Rank #1.

AngloGold Ashanti Limited (AU)

The Zacks Rank #2 (Buy) AngloGold Limited is the largest gold producer at 7 million ounces a year, with reserves of 126 m oz.

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VanEck Vectors Gold Miners ETF (GDX): ETF Research Reports
 
Sprott Junior Gold Miners ETF (SGDJ): ETF Research Reports
 
iShares MSCI Global Gold Miners ETF (RING): ETF Research Reports
 
SPDR Gold Shares (GLD): ETF Research Reports
 
AngloGold Ashanti Limited (AU) : Free Stock Analysis Report
 
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
Royal Gold, Inc. (RGLD) : Free Stock Analysis Report
 
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU): ETF Research Reports
 
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