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  • ETF Showdown: This One's For Goldfinger 0 comments
    Apr 4, 2011 2:16 PM | about stocks: GDXJ, RBY, NG, NEM, GG, ABX, GLDX, GDX

    By Jason Raznick

    Since the series debuted in 1962, 22 "official" James Bond movies have been produced. Did you know that three of the titles mention gold? Of those three, "Goldfinger" is probably still the most-well known and that film, the third in the 007 series, is still widely regarded as one of the best in the series.

    Basically, the villain, Auric Goldfinger, wants to loot Fort Knox for its gold. Fast-forward almost 50 years since the movie was made and plenty of conspiracy theorists openly say there isn't even any gold in Fort Knox. Maybe Auric Goldfinger would need to consider some ETFs if he was around today.

    So with that, this week's ETF Showdown compares two equity-based gold ETFs that might just appeal to Goldfinger himself.

    When discussing gold ETFs that track equities rather than featuring physical holdings of the commodity itself, that means we have to talk about gold miners and that leads us to the Market Vectors Gold Miners ETF (NYSEARCA:GDX), the big kahuna of equity ETFs with gold exposure.

    GDX is almost five years-old and has accumulated almost $660 million in assets under management, highlighting its dominance in this genre. But competition may be here in the form of the newly minted Global X Gold Explorers ETF (NYSEARCA:GLDX). GLDX is five months old, but has garnered $25.4 million in AUM since its debut.

    Gold explorers and gold miners, what's the difference? Well, the important difference to note with GDX and GLDX is the holdings. GDX has 31 holdings and GLDX has 31, but GLDX offers exposure to the more speculative side of gold stocks.

    Anyone that has invested in gold equities probably knows about Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and Newmont Mining (NYSE:NEM), all of which can be found among GDX's top-10 holdings. On the other hand, companies like NovaGold Resources (NYSEMKT:NG), Rubicon Minerals (NYSEMKT:RBY) and other less heralded fare make up the bulk of GLDX's holdings.

    Since GLDX is more a junior miner play, it is more than 83% allocated to Canada at the country level compared to about 65% for GDX. GDX trumps its newer rival when it comes to expenses with an expense ratio of 0.53% compared to 0.65% for GLDX. Even the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) features lower fees than GLDX.

    The bottom line is that for investors that are simply gold crazy, GDX and GLDX combined could be a potent idea because that scenario covers large caps and more speculative issues. Still, it's usually a more sound idea to keep risk to a minimum with gold stocks, so GDX is probably the better bet for the conservative trader or investor.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Themes: ETFs Stocks: GDXJ, RBY, NG, NEM, GG, ABX, GLDX, GDX
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