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Exploring The Best Gold ETFs

Apr. 05, 2013 6:27 AM ET
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Investments in Gold Explorers ETF are abuzz, as the streets are now agreeing on the bottoming out of the sector. Historically exploration stocks gains the most in a rally as most Senior Gold Miners will endlessly fund the exploration companies for new mine discoveries and what may be a termed as a newer trend is playing the Venture Capital with Gold; which simply means betting on the small and discounted exploration equity which may show a manifold value increase in case of a new mine discovery or simply due to the external funding; although a high risk high reward territory but is still getting its due attention, especially in the broader markets.

Adding this commodity in all forms to one's portfolio not only makes for a sound judgement but a profitable one too. The precious metal calls for low maintenance and has never really experienced a major down fall in its value.

Gold has been in demand since time immemorial and the modern world considers the metal as Safe Asset due to its tolerance levels in times of global melt downs. Moreover its inverse relationship with the American Currency and a fact that Gold is getting scarce with each passing year more or less mandates a partial fund allocation towards Gold Explorers Funds as the direct equity route will definitely require profound research and insight into the companies and again for some foreign investors, first hand buying may not even be possible due to the regulatory structure that is followed.

Additionally focussing on companies that own land around potential mines can help investors wanting to play this sector.

A drop in dollar rates or a slowing down economy will not affect gold prices in a negative way. It will continue to grow positively. Low rate of interests offered by banks can instead propel individuals to add this precious metal to their portfolios. Since investing in stocks of companies could incur a risk especially in choppy trades a strategic exposure to index attuned exploration funds is a better option as indirectly one is getting a standardised vestment in the sector and globally most liquid listed stocks from the industry.

Gold's market value has risen and with it people have become increasingly interested in investments in Gold Exploration sector as it carries out the most vital job of discovering the new metal deposits and the logistics around it. There are a limited number of gold reserves globally and tracing the location entitles the company to solid profits.

The success of such stocks does not depend much on investor sentiment but strong leadership on the part of the firm and successful discovery of the mines. Alongside the right equipment to carry out extraction and further bringing the extractable metal down safely to the market.

The ETF route has gained immense popularity since more than a decade and an accepted investment method by the senior hedge fund managers along with simple single investors. Buying a Gold Explorers ETF is simple as compared to purchasing gold bars and coins.

As the focus is to diversify Gold Portfolio by combining the bullion exposure with that of market traded Gold Exploration funds. Gold mining companies have a direct relation with the spot prices of the metal and will rise with any increase in the metal and vice versa. Gold miners though have to bear fixed costs to carry out their operations but these companies promise steady cash flows regularly unlike owning the metal in physical form. At the first hint of a rally most cost incurred is recovered due to sizable upside on the spot prices and investors may beget instant gains beyond that.

Global X gold exploration invest [GLDX] delivers as per the performance of the Solactive Global Gold Explorers Index post the yearly expenses of 0.65%. The benchmark follows 20 most traded and large cap gold explorer equity from around the world and for known reasons have given an inverse +25% YTD gains. The fund issuers cite the current beat down spot prices as a perfect time to play venture capital gold and enjoy multi bagger gains. The biggest four assets are Torex Gold Resources, Sabina Resources Ltd., New Strike Capital Inc. and Keegan Resources Incorporated sharing a close to 29% of the GLDX Gold Explorer fund holdings among themselves.

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