I like two gold ETFs: Market Vector Gold Miners (NYSE: GDX) and the new Market Vector Junior Gold Miners (NYSE: GDXJ), both of which give you broad exposure to the gold sector. GDX is made up of the larger companies while GDXJ is a more speculative play on smaller exploration firms.
I've never been a gold bug but it's likely that even if bullion corrects in the short term, the longer term direction should be up. We could start to see evidence of that as soon as the U.S. dollar stops strengthening against the euro. Right now, the greenback is benefiting from the weak economic picture in Europe but over time Washington's ballooning deficits will begin to catch up with up with us, the U.S. dollar will resume its slide, and bullion will rise.
I want to leave you with the thought that the emerging markets story is still intact and strengthening. The recent pullback in China and other Asian markets is temporary and you would be wise to add your portfolio through the various ETFs that are designed to capture the growth in these markets.
There is a new one called the Claymore China Small Cap ETF (NYSE: HAO) which gives you exposure to smaller Chinese companies. It can be volatile, of course, but for aggressive investors is an alternative to the better-known iShares FTSE/Xinhua China 25 Index Fund (NYSE: FXI) which holds larger cap names. I recommended FXI on Feb. 16/09 (IWB #2907) at US$26.81. It closed on Friday at US$38.91 and I continue to rate it as a buy.
Also, consider adding Brazil to your emerging markets mix. The iShares MSCI Brazil ETF (NYSE: EWZ) has pulled back dramatically in the last couple of months and is in buy territory again. As reported in last week's IWB, there is a new Canadianized version of this ETF which trades on the TSX as XBZ, however it has a slightly higher MER.
(Please note: none of GDX, GDXJ, HAO, EWZ, or XBZ is a formal recommendation. I mention them for your interest only and I will not be tracking them for the IWB on an on-going basis.)
What all this adds up to in my mind is that we're beginning to see the sunset of the American era. With any luck, the country will hold on until I'm retired and living in Mexico but in the meantime I intend to devote 30% of my portfolio to emerging markets and various commodity stocks. Those include many of the agriculture names that I've recommended over the last couple of years.
Of course it's always possible that we will get enlightened leadership that will slash spending, reduce debt, and put the U.S. back on the right course but I'm not betting on it. The Republican Party seems to be determined to focus on social issues, like gay marriage, abortion, and gays in the military while vehemently opposing any attempt to raise taxes. All this contributes nothing to fixing America's financial and economic problems. With the Republicans poised to make big gains in the coming mid-term election and perhaps even take control of the House of Representatives in the process, one can't be optimistic that they will provide any more leadership than the Democrats have done in recent months.
The United States is in a bad situation. Whoever thought the day would come when many knowledgeable Americans would look at Canada with envy?
Disclosure: Long GDX, GDXJ, HAO