The price of gold dropped by more than 3% in August despite sky-high inflation, which raises questions about its property as an inflation hedge. Standard Chartered analyst Suki Cooper said in a note that gold could trend lower in the coming months. Additionally, silver prices saw an 11.6% decline in August.
Gold faces the brunt of bearish sentiments due to rising interest rates and yields. Commodity analysts at Credit Suisse lowered their gold price forecast for this year from $1,850 an ounce to $1,725 an ounce.
Similarly, Commerzbank also downgraded its gold price prediction for this year. Additionally, the German bank lowered its silver price target to $20.50 an ounce, down from the previous forecast of $24 an ounce, noting that the metal market has been hit with bearish sentiments.
VanEck Gold Miners ETF (GDX)
GDX offers investors exposure to some of the largest gold mining companies in the world, thereby delivering what can be considered “indirect” exposure to gold prices. GDX generally invests at least 80% of its total assets in common stocks and depositary receipts of companies involved in the gold mining industry.
The fund has approximately $10.74 billion in total net assets. Newmont Corp (NEM) is the top holding of GDX, with a 12.47% weighting, followed by Barrick Gold Corp (GOLD) and Franco-Nevada Corp (FNV), with 10.08% and 8.75% weightings, respectively.
GDX’s expense ratio of 0.51% is significantly higher than the category average of 0.48% and pays an annual dividend of $0.19, translating to a 0.55% yield. The fund has declined 37.3% over the past six months and 27.3% over the past three months to close its last trading session at $23.44. Over the past year, the ETF’s net fund outflows were $376.81 million.
GDX’s NAV stands at $23.52. The fund has a 0.97 five-year monthly beta.
GDX’s POWR Ratings reflect this bleak outlook. The ETF has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
iShares Silver Trust (SLV)
SLV tracks the LBMA Silver Price ($/ozt) index. The fund uses a physically-backed methodology that seeks to reflect the performance of the price of silver. The fund is not actively managed.
SLV has approximately $9.70 billion of net assets. The ETF’s expense ratio of 0.50% is significantly higher than the category average of 0.45%. The ETF has plunged 27.7% over the past year and 30.3% over the past six months to close its last trading session at $16.54. The ETF has witnessed a $365.31 million net fund outflow over the past month.
Its NAV stands at $16.95. The fund has a five-year monthly beta of 0.92.
SLV’s weak fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of D, which equates to Sell.
SLV has an F grade for Trade and a D for Buy & Hold and Peer. SLV is ranked #14 in the same industry. To see more of SLV’s POWR Ratings, click here.
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GDX shares were trading at $24.31 per share on Wednesday afternoon, up $0.87 (+3.71%). Year-to-date, GDX has declined -24.10%, versus a -15.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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