There are 2 ways for investors to gain exposure to the gold price. Investors can either directly invest in gold through physical gold, gold ETF or gold futures ETFs or using exchange traded funds that holds gold miners. (Physical gold and be used in conjunction with Dividend ETFs to form a more rounded portfolio.)
Gold miners can be an attractive option for those that are looking for gold investment that can track the price of price of gold as well as generating cash flow, earnings and can growth much faster than changes in the gold price.
The list of gold miners exchange traded funds is divided into sub sectors of mature gold miners with proven reserves and resources and a track record in producing gold or higher risk junior gold miners who are still in the exploration stage of growth.
Gold Miner ETF List
|ETF Category||Name||Ticker||AUM||Gold Company Holdings|
|Large and Mid Size Gold Miner ETF||Gold Miners ETF||GDX||$7.70 B||40|
|Global X Pure Gold Miners ETF||GGGG||$4.22 B||24|
|iShares MSCI Global Gold Miners ETF||RING||$58 M||38|
|Junior and Exploration Gold Miners ETF||Junior Gold Miners ETF||GDXJ||$1.88 B||66|
|Global X Gold Explorers||GLDX||$40 M||21|
|PowerShares Global Gold and Precious Metals Portfolio||PSAU||$24 M||65|
Gold Miner ETF Performance
Below is the 12 month performance of the Gold Miner (GDX ETF). It can be used as a representation of the overall gold mining industry performance.
The size of listed gold mining fund is a direct function of investor allocation to that ETF. The breakdown of total gold miner asset under management shows most investors in the market favours investing in developed gold miners.
Gold Miners ETF (GDX) is the largest fund on the gold mining ETF list measured by asset under management. The ETF covers 40 largest listed gold miners. It has the lowest risk measured by standard deviation out of all gold miner ETFs due to primarily focused on mature gold producers.
Gold Miner ETF (GDX) Analysis Summary
1. Top 10 holdings comprise up to 70% of total AUM.
2. 84% of the fund is invested in 3 largest gold producing countries broken down by 62% of the companies in Canada, 13% United States and 9% in Australia.
3. GDX beta vs S&P 500 is around 0.30. This means GDX is only 30% as sensitive to the overall market moves. If the S&P 500 rise or fall 1%. Gold Miner ETF would only rise and fall 30% of the change on that day.
4. GDX focus on large miners can be seen in the average weighted market capitalization of the holdings at $9.5 billion.
On the surface Global X Pure Gold Miners ETF (GGGG) can be considered to be one of the most concentrated ETF out of the above gold miner ETF list. Total AUM of $4.22 Billion spread across only 24 positions. From reviewing GGGG holdings in detail, the gold miner fund is diversified in the asset weighting which lessen degree of overall concentration risk to particular gold miner.
GDX’s 2 largest positions account for 26% of the ETF with 13% asset weighting each. On the other hand, the largest position in GGGG only account for 8% of the ETF. Overall gold miner weights in GGGG is distributed more evenly at which only when you reach down to 17th largest position that the position weight drops below 4%.
Compared to GDC from the cumulative holdings perspective. The top 10 positions adds up to just above 50% of Global X Pure Gold Miners ETF vs 70% for Gold Miner ETF. The almost equal weight of the major positions in GGGG consequently can be reflected in the 45 degree angle of the cumulative holding line of the top largest position in the ETF.
Considering the relative evenness of total holdings. GGGG can still be seen to have higher aggregate risk and volatility to GDX
1. GGGG beta estimated to be 0.84 and standard deviation overtime a tiny bit higher at 34% vs the broader market). This shows the ETF price and sensitivity tracks much closer to the market than what you would expect (this can be a positive or negative depending on investor preference for a gold miner ETF to track the market or wanting a more non correlated holding)
2. Greater weighting to gold miners in higher risk countries such as South Africa, Turkey, China and Kazakhstan which can affect holdings operating in those countries.
3. Averaged weighted market capitalization of the gold miners in the ETF is around $2.5 billion vs $9.5 billion in Gold Miner ETF. Gold miners in GGGG can be considered middle and larger end of small capitalized gold mining stocks.
Junior Gold Miners ETF (GDXJ) also managed by Market Vectors is a listed gold miner fund focusing on the mining companies in the juniors or exploration stage of business development.
Key highlights of GDXJ
1. GDXJ tracks the market closely with beta close to 1 (0.94) with understandably higher standard deviation (41%) to the more mature gold mining exchange traded funds.
2. Emphasis on gold explorers and juniors reflected in the average weighted market capitalization of the stocks at only $500 million.
3. GDXJ compensate the smaller market capitalization risk through holding greater number of holdings with 60 junior gold miners included in the fund.
Junior Gold Mining Exchange Traded Fund
The 3 smaller ETFs on the gold miner ETF list below have very limited total asset under management. Combined AUM adds up to just above $100 million. For investors considering these ETFs intraday liquidity and transaction cost must be taken into account when entry and exiting the positions.
- Shares MSCI Global Gold Miners ETF
- Global X Gold Explorers
- PowerShares Global Gold and Precious Metals Portfolio
Interestingly the breakdown of the country exposure shows Canada is commonly the most heavily weighted country in all the gold miner ETFs. Hence investors should be conscious of USD/CAD as it would affect overall ETF performance.
Gold Miner ETFs Country Exposure Analysis
We feel the 3 major gold mining ETF analyzed above provide specific focus and aspects of the gold mining sector most investors are looking for given the broad coverage.