Why Invest in Gold Stocks?

Investing in Gold Stocks can offer several benefits. It provides a diversified portfolio with exposure to the gold mining sector, which can act as a hedge against inflation. Gold has historically maintained its value during economic uncertainties and has the potential for appreciation.

What are the Main Risks of Investing in Gold Stocks?

The main risks include market risks and volatility, which can result in fluctuations in the value of your investment. There is also a risk associated with investing in small-scale companies, as their performance may be more volatile and unpredictable.

What are Gold Stocks?

Gold Stocks refer to shares or equities of companies involved in the exploration, extraction, and refining of gold. When you invest in Gold Stocks, you are investing in companies that are engaged in the gold mining sector. These companies can range from more established and mature firms to younger companies with significant growth potential.

Gold Stocks

Marketing Communication

VanEck Gold Miners UCITS ETF

Access the most mature and stable companies in the gold mining sector
Protection from inflation
Regular income from dividends
Relatively low cost at 0.53% annually

ETF Details

Basis-Ticker: GDX
ISIN: IE00BQQP9F84

TER: 0.53%
AUM: $1.3 B (as of 23-12-2024)
SFDR Classification: Article 6

Lower risk

Higher risk

Typically lower reward

Typically higher reward

VanEck Junior Gold Miners UCITS ETF

Focus on young companies with significant potential
Exposure with greater leverage to the price of gold
Opportunities for significant expansion and growth
Relatively low cost at 0.55% annually

ETF Details

Basis-Ticker: GDXJ
ISIN: IE00BQQP9G91

TER: 0.55%
AUM: $471.3 M (as of 23-12-2024)
SFDR Classification: Article 6

Lower risk

Higher risk

Typically lower reward

Typically higher reward

Investing in Gold Through Gold Stocks

Investors are aware that there are two main methods for acquiring an exposure to gold. The first involves directly acquiring the precious metal itself by purchasing gold bullions, jewellery and other items made from gold. The second, however, involves investing in those companies dealing in the extraction and processing of gold.

Both versions of the gold stocks offered by VanEck give investors the opportunity to access the gold mining sector at a relatively low cost and in a diversified way. Above all, it guarantees pure play exposure to companies involved in gold exploration, extraction and refining.

VanEck offers investors the following two options:

VanEck Gold Miners UCITS ETF (IE00BQQP9F84)

VanEck Junior Gold Miners UCITS ETF (IE00BQQP9G91)

Source: Bloomberg, VanEck.

All performance information stated refers to the past and does not constitute a guarantee of future results. Future performance could be better or worse than current performance. Returns on investments can fluctuate. Therefore, upon repayment, investors' shares may have a greater or lesser value with regard to their original cost.

Benefits and Risks of Investing in Gold Stocks

Investing in gold stocks can be a great move for building a diversified portfolio while also potentially seeking to protect yourself from inflation, which is a particularly topical issue in recent times.

Historical Protection from Inflation
Opportunity to Receive Regular Dividends
Exposure With Leverage to the Price of Gold
Attractive Valuation Prices at Historic Levels

Gold has historically protected investors from inflation. In times like these, where a combination of factors is leading to unprecedented price increases, this precious metal has kept its value well in light of significant declines among other asset classes and the loss of purchasing power among consumers. Nevertheless, it is important to note that there is no guarantee that what has happened in the past will continue in the future.

Companies in the gold mining sector pay dividends. Therefore, as well as a possible return on the price of shares, investing in gold stocks also gives you the opportunity to receive a regular income through dividends. In particular, for the VanEck Gold Miners UCITS ETF, made up of the most mature and stable companies, the yield from dividends in the last year has always been around or above 2%. This yield (or any positive yield) cannot be guaranteed in the future.

Comparison of yield from dividends (quarterly)

Source: Bloomberg, VanEck, Data updated on 19/08/22.

Traditionally, during periods when gold has increased in value, companies in the gold mining sector have offered higher returns than gold itself. This is because the financial leverage they exploit acts as a multiplier on returns. This is obviously the case for both bull markets and bear markets, and applies, above all, for young companies. It is a factor to take into account when considering an investment in gold stocks.

The gold mining sector and the companies featured in VanEck's gold stocks offer good financial conditions and attractive valuation prices compared with past levels. The following graphs show the development of two valuation price metrics: P/E and P/CF from 2017 to today for both of the stocks. Although valuation prices are attractive compared to past levels, this does not necessarily mean that they are traded at a reasonable or low price.

Historical P/E of Gold Miners ETF

Source: Bloomberg, VanEck, Data updated on 24/08/22.

Historical P/CF of Gold Miners ETF

Source: Bloomberg, VanEck, Data updated on 24/08/22.

Key Documents and Links

Main Risk Factors of Gold Stocks

Risk of Investing in Gold and Silver Mining Companies
Risk of Investing in Smaller Companies
Risk of Investing in the Basic Materials Sector
Market Risk and Volatility

The Fund will be sensitive to fluctuations in, and its performance will be contingent upon, to a larger extent on, the general condition of gold and silver ore mining companies.

The securities of small-scale companies might be more volatile and less liquid than the securities of large ones. Smaller companies, in contrast to larger ones, may possibly have a shorter history of operations, fewer financial resources, less competitive strength, may have a less diversified product line, may be more susceptible to market pressure and may have a smaller market for their securities. This is a risk factor of gold stocks.

Companies involved in the production and distribution of basic materials may be negatively impacted by developments in global events, political and economic situations, energy conservation, environmental policies, commodity price volatility, changes in exchange rates, imposition of import controls, increased competition, depletion of resources and labor relations. This is another risk factor of gold stocks.

The value of investments and the revenue from them, and thus, the value of and income from the shares can go down as well as up and an investor may not get back the amount invested. The ETFs’ exposure is based upon the performance of the Index securities which, in turn, is exposed to general market movements (negative as well as positive). The prices of the securities in a given Gold Miners ETF are subject to the risks linked to investing in the securities market, including general economic circumstances and unforeseen declines in value.

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Email: EMEAinfo@vaneck.com