The precious metals market plummeted on the positive vaccine news earlier this week. With an expected V-shaped recovery amplified by the effectiveness of the vaccine, investors shifted their focus from safe-haven assets to risky assets. Following this news, both gold and silver witnessed a sell-off.
However, even if the vaccine clears all the FDA tests for approval, widespread immunization is months away. Economic pain and high unemployment levels require government stimulus, which is long overdue. There are fading hopes for another fiscal stimulus package when the Fed is encouraging both inflation and stimulus.
The global economy continues to remain weak, short-term interest rates remain unchanged, and central banks are continuing with their loose monetary policy. The value of precious metals is inversely linked to the economy. Consequently, investors will soon turn to precious metals in protecting their investments, and hedge against inflation and economic uncertainty.
As ETFs provide a broad and diversified exposure at minimal operating costs, it could be a good idea to invest in the precious metals space through ETFs. The SPDR Gold Shares (GLD), VanEck Vectors Gold Miners ETF (GDX), iShares Silver Trust (SLV) and Global X Silver Miners ETF (SIL) are well positioned to soar with precious metals becoming more bullish.
SPDR Gold Shares (GLD)
GLD tracks the gold spot price using gold bars held in London vaults and seeks to reflect the performance of the price of gold bullion. The spot price for gold bullion is determined by market forces in the 24-hour global over-the-counter (OTC) market for gold. GLD is the first US traded gold ETF that invests directly in physical gold. The fund has $74.91 billion in AUM, with an expense ratio of 0.40%.
The product structure reduced the difficulties of buying, storing, and insuring physical gold bullion for investors. The Trust holds gold bars and from time to time, issues baskets in exchange for deposits of gold and distributes gold in connection with redemptions of baskets.
GLD closed yesterday’s trading session at $174.90, gaining more than 23% year-to-date. The fund has witnessed net inflows of $9.56 billion in the past six months and is up nearly 10% in the same period. The ETF is currently trading 10% below its all-time high of $194.45.
How does GLD stack up for the POWR Ratings?
B for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Overall POWR Rating.
It is ranked #2 out of 35 ETFs in the Precious Metals ETFs group.
VanEck Vectors Gold Miners ETF (GDX)
GDX is one of the most popular funds in the global mining segment that provides exposure to publicly traded companies worldwide involved primarily in gold mining. The investment seeks to offer investment results that correspond to the NYSE Arca Gold Miners Index, a multi-cap market-weighted index of global gold-mining firms.
GDX has $16.15 billion in AUM and an expense ratio of 0.52%. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.39 out of 10. The fund pays an annual dividend of $0.19 that translates into a yield of 0.51%.
The fund currently holds 53 companies and has…
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