Investors looking for ways to invest in gold are fortunate today to have a slew of options to choose from. Options include individual precious metals miners to physical bullion or Exchange Traded Funds (ETFs).
Deciding how one wants to gain exposure to gold is the key question many face. In this article, I’m going to discuss why the VanEck Vectors Gold Miners ETF (NYSE:GDX) is a great choice for most investors.
For those who, like myself, believe the price of gold is likely to continue to appreciate through this period of economic uncertainty we now find ourselves in, the GDX ETF is a great way to gain high levels of exposure to said gold prices. This is because gold miners tend to produce higher levels of profitability as gold prices rise.
This is due to high fixed costs which don’t change to a significant degree as production volume increases and margins widen. Miners often generate significantly higher beta returns than companies in other sectors.
This is extremely beneficial in bull markets for gold, but similarly negative during periods of time when the price of gold retreats.
This ETF allows investors to gain this leverage to gold prices while at the same time diversifying out any specific idiosyncratic mine-related risk from any one given mine.
With investors generally only able to guess as to which mines will or won’t have any COVID-related shutdowns, owning a highly diversified ETF removes this risk from the decision and spreads this risk out across a broad basket of some of the best large precious metals miners with operations around the world.
Invest wisely, my friends.