Gold prices have rebounded off their March lows on continued concerns over rising inflation, a weakening U.S. dollar, and stock market volatility. Indeed, gold prices are up for the eighth straight day. The rising demand for the precious metal is driven primarily by the yellow metal’s ability as a hedge for investors against inflation and current market volatility.
Because rising consumer spending on the back of an improving job market could lead to further increases in consumer prices, demand for gold as a hedge should rise further. As such, we think it could be wise to invest now in GLD and VanEck Vectors Gold Miners ETF (GDX).
SPDR Gold Shares (GLD)
GLD is one of the most popular ETFs in the world. It is a relatively straightforward product for which underlying assets consist of gold bullion stored in secure vaults. The price of this ETF can be expected to move in lock step with spot gold prices.
With $60.65 billion in AUM, GLD was the first ETF to market to invest directly in physical gold. It has a 0.40% expense ratio, which is lower than the 0.49% category average. GLD has gained 8.5% over the past year and 5.4% over the past three months.
GLD’s POWR Ratings are consistent with its growth outlook. It has an overall B rating, which equates to Buy in our proprietary rating system. It also has an A for Trade Grade, and a B for Peer Grade and Buy & Hold Grade.
VanEck Vectors Gold Miners ETF (GDX)
GDX offers investors exposure to some of the largest gold mining companies in the world, thereby delivering what can be viewed as “indirect” exposure to gold. The performance of the stocks it holds generally has a strong correlation with movements in spot gold prices. But in certain environments, GDX stocks and physical gold prices can move in opposite directions.
The fund has $15.72 billion in AUM. Its top holdings include Newmont Corporation (NEM), with a 15.88% weighting, Barrick Gold Corporation (GOLD) at 11.85% and Franco-Nevada Corporation (FNV) with 7.77%. The fund’s 0.53% expense ratio is slightly higher than the 0.46% category average.
GDX pays a $0.19 annual dividend, which yields 0.5% on the prevailing price. The ETF’s average four-year dividend yield stands 0.6%. GDX has gained 20% over the past three months and 10.2% over the past year.
It’s no surprise that GDX has an overall B rating, which equates to Buy in our proprietary rating system. It has an A for Trade Grade, and a B for Buy & Hold Grade.
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GLD shares were trading at $176.33 per share on Monday afternoon, up $0.29 (+0.16%). Year-to-date, GLD has declined -1.14%, versus a 12.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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