GDX and GDXJ: Question and Answer
09 August 2022
Gold has long been considered an enduring store of value even under the most adverse economic conditions. Often overlooked in periods of prosperity, gold can also serve several important roles beyond a safe haven asset. Gold has historically enhanced portfolio diversification, served as an inflation hedge, and provided appreciation potential.
As a real asset, investing in gold can come with unique considerations such as tax treatment or the storage and safekeeping of the metal. Alternatively, many investors look to stocks of companies that find and extract gold, an approach that comes with its own set of considerations. In this Q&A, we address frequently asked questions about investing in gold miners and specifically about the VanEck Gold Miners UCITS ETF (GDX) and VanEck Junior Gold Miners UCITS ETF (GDXJ).
- Q: What are gold miners?
- Q: How is investing in gold miners different from gold?
- Q: How do gold and gold mining stocks fit into a portfolio?
- Q: What are VanEck’s gold mining ETFs?
- Q: How can investors buy VanEck ETFs?
Q: What are gold miners?
A: The gold mining industry consists of companies whose primary business activities are exploring, mining, and refining the precious metal.
The lifecycle of the gold mining process is extremely long and arduous. It also requires significant capital. Many new and small mining companies are unable to endure the time required to produce materials that can be refined. On average, it takes over 20 years before a mine reaches production.
Gold miners are often classified into three primary groups:
- Majors – Tend to be less volatile, more mature mining companies, with larger portfolios than their smaller peers. These are well-capitalized companies with decades of history and world-spanning operations.
- Mid-tiers – A mix of companies with sizable and diversified gold production, substantial growth potential, and smaller market capitalization. They tend to exhibit less risk than their exploration peers.
- Juniors – Increased risk, but with the potential to offer higher upside; focused on the exploration and development of newer mining operations. Also, often acquisition targets of larger, more established operators.
Q: How is investing in gold miners different from gold?
A: Though gold miners are heavily influenced by movements in the price of gold, they are subject to equity market risk and have historically exhibited higher levels of volatility than the metal itself. They have offered higher beta exposure to gold prices, meaning they tend to appreciate more when prices rise and decline more when prices fall.
This leveraged exposure to gold prices can make them attractive in various market conditions, but investors should consider the elevated risk and remember that gold miners may not always offer an investment experience highly correlated with that of gold.
Q: How do gold and gold mining stocks fit into a portfolio?
A: Investors typically consider allocations to gold or gold miners for portfolio diversification and as an inflation hedge. However, gold also offers the potential for upside appreciation. In fact, gold has outperformed U.S. stocks, U.S. bonds and U.S. treasuries since the beginning of the century.1 Additionally, because of their targeted exposure and liquidity, gold mining stocks can also be used tactically by investors to express a short- or long-term view with a highly liquid, low-cost ETF.
Gold has also historically served as a safe haven during market turbulence. For example, since 2008, gold has outperformed U.S. stocks and treasuries during the most significant market crises.
Gold Bullion vs. U.S. Stocks and Treasuries in Recent Market Crises
Source: Morningstar. Data as of June 2020. US Stocks represented by S&P 500 Index; Gold Bullion represented by LBMA PM Gold Price; US Treasuries represented by the Bloomberg Barclays US 1-3 Year Treasury Bond Index. Past performance is not indicative of future results. Indices are not securities in which investments can be made. An index’s performance is not illustrative of a fund’s performance.
Q: What are VanEck’s gold mining ETFs?
A: The VanEck®Gold Miners UCITS ETF (GDX) is the first gold miners ETF in the U.S. It seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index (GDMNTR), a pure-play, global index, tracking the performance of the largest publicly-traded companies in the gold mining industry.
The VanEck Junior Gold Miners UCITS ETF (GDXJ) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® Global Junior Gold Miners Index (MVGDXJTR), which is intended to track the overall performance of small-capitalization companies that are involved primarily in the mining for gold and/or silver.
Q: How can investors buy VanEck ETFs?
A: Learn more here: GDX and GDXJ.
1Source: FactSet. Data as of March 2022. U.S. Stocks represented by S&P® 500 Index; U.S. Bonds represented by Bloomberg Barclays U.S. Aggregate Bond Index; Gold ($/oz) represented by LBMA PM Gold Price; US Treasuries represented by the Bloomberg Barclays US 1-3 Year Treasury Bond Index. Past performance is not indicative of future results. Indices are not securities in which investments can be made.
VanEck Asset Management B.V., the management company of VanEck Gold Miners UCITS ETF and VanEck Junior Gold Miners UCITS ETF (the "Funds"), sub-funds of VanEck UCITS ETFs plc, is a UCITS management company incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). The Fund is registered with the Central Bank of Ireland and tracks an equity index. The value of the ETF assets may fluctuate heavily as a result of the investment strategy. If the underlying index falls in value, the ETF will also lose value.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com or from the Management Company.
Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com or from the Management Company.
NYSE Arca Gold Miners Index is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by VanEck UCITS ETF plc. (the “Fund”) in connection with VanEck Gold Miners UCITS ETF (the “Sub-Fund”). Neither the Fund nor the Sub-Fund is sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding the Fund or the Sub-Fund or the ability of the NYSE Arca Gold Miners Index to track general stock market performance. ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA GOLD MINERS INDEX OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. ICE Data Indices, LLC and its affiliates (“ICE Data”) indices and related information, the name "ICE Data", and related trademarks, are intellectual property licensed from ICE Data, and may not be copied, used, or distributed without ICE Data's prior written approval. The Fund have not been passed on as to its legality or suitability, and is not regulated, issued, endorsed, sold, guaranteed, or promoted by ICE Data.
MVIS® Global Junior Gold Miners Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of Van Eck Associates Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH (“MarketVector”), Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Junior Gold Miners UCITS ETF is not sponsored, endorsed, sold or promoted by MarketVector and MarketVector makes no representation regarding the advisability of investing in the Fund.
Important Disclosure
This is a marketing communication for professional investors only. Please refer to the UCITS prospectus and to the Key Investor Information Document (KIID) before making any final investment decisions.
This is a marketing communication for professional investors only. Please refer to the UCITS prospectus and to the Key Investor Information Document (KIID) before making any final investment decisions. This information originates from VanEck Securities UK Limited (FRN: 1002854), an Appointed Representative of Sturgeon Ventures LLP (FRN: 452811) which is authorised and regulated by the Financial Conduct Authority in the UK. The information is intended only to provide general and preliminary information to FCA regulated firms such as Independent Financial Advisors (IFAs) and Wealth Managers. Retail clients should not rely on any of the information provided and should seek assistance from an IFA for all investment guidance and advice. VanEck Securities UK Limited and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck Securities UK Limited
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Important Disclosures
1 Source: FactSet. Data as of March 2022. U.S. Stocks represented by S&P® 500 Index; U.S. Bonds represented by Bloomberg Barclays U.S. Aggregate Bond Index; Gold ($/oz) represented by LBMA PM Gold Price; US Treasuries represented by the Bloomberg Barclays US 1-3 Year Treasury Bond Index. Past performance is not indicative of future results. Indices are not securities in which investments can be made.