Whats not in the news recently?
Gold.
If you remember, Gold was touching 5200 $ (USD/t.oz) and came down to 4000 $ (USD/t.oz).
I don’t expect gold to go on the same type of run it did from its 2022 low to its high this past January. Over that timeframe, it surged nearly 250%. So I don’t expect gold to double or more from here. But it could head higher and possibly make a run at a new all-time high by the end of the year.
Gold itself isn’t a small asset class. If you look at the “market cap” of the metal itself (total mined ounces multiplied by price), it’s just over $30 trillion. Compare that to US stocks at a market cap of about $77 trillion, and it may give you some context for how big the physical gold market is.
According to Goldman Sachs, last December, gold exchange-traded funds accounted for just 0.17% of US portfolios. They estimate that every 0.01 percentage-point increase in gold’s share would lift its price by 1.4%.
More than that, gold and mining companies as a percent of global assets are near all-time lows. Meaning there’s a lot of catching up to do. But again, gold itself is only one part of the story
Right now, gold mining companies are printing cash. Free cash flow (FCF) yield—how much cash a business is actually generating—is about 10X higher at senior gold miners than it was in 2020. At the same time, gold miners are the cheapest we’ve seen versus the S&P 500 in at least a decade.
Think about that for a second. These are companies that are printing cash. They’re carrying far less debt than they did at the start of the decade. And investors are pricing them as if the entire sector is going out of business.
Gold reaching 5000 $ again on the horizon. So here is my play;
- I always buy physical gold, which I did during this July/August.
- Gold ETF/Company – I had a few companies earlier and been in and out due to the risk. Now that I have found few ETF’s and done some analysis.
VanEck ETF, GDX and GDXJ.
- The VanEck Junior Gold Miners ETF (GDXJ) offers higher beta and growth potential versus the VanEck Gold Miners ETF (GDX) amid a bullish gold outlook.
- GDXJ’s diversified portfolio of junior and mid-tier miners provides greater upside, with a 1-year total return 13.22% higher than GDX.
- Both ETFs benefit from operating leverage to gold prices, but GDXJ is more sensitive, making it suitable for aggressive, growth-oriented investors.
- Both GDXJ and GDX are rated ‘Buy,’ but favor GDXJ for higher risk/reward.
GDXJ is a suitable choice for investors who anticipate improved margins for gold mining companies, along with increased activity in the M&A market, with larger companies acquiring smaller ones. If you are a less risky investor and want strategic exposure to gold miners, go for GDX (like myself). That fund has more moderate risks because it’s less sensitive to gold prices. That means if the bull market ends, your GDX portfolio will feel safer than your GDXJ one.
I choose GDX and started building a base.
