I have written a lot of commentary in the past about the Van Eck Gold Miners ETF (TSX:GDX). There are various reasons I believe this ETF will outperform over the medium to long term relative to the TSX. In this article, I am going to highlight why I think this ETF will outperform other gold investments. I will compare this ETF to bouillon as a comparable asset.
The price of gold bullion are commonly what is tracked by investors. Gold bullion prices include spot prices and futures prices. This key commodity price is a fundamental driver of the stock price performance of gold miners. These companies are all, by definition, price takers.
This means higher commodity prices directly impact producers’ top and bottom line. That said, various analysts have recently pointed to an important fact. On a relative basis, that is, comparing the valuation of gold producers to the price of gold at a given point in time, gold producers’ stock prices are at a 30-year low, using this metric alone.
On this basis, investors ought to see significant value with this ETF. I would highly recommend this investment over buying physical gold for this reason as well as others, particularly the liquidity this ETF provides.
Invest wisely, my friends.
