Which Gold Miner ETF Is Right For You? GDX vs. GDXJ vs. RING

In recent years, gold miner ETFs have become some of the most popular investment tools, offering “indirect” exposure to gold prices without the headache of futures trading or physically holding the precious metal. Considering today’s rocky environment, gold mining stocks can be a more appealing option than investing in physical bullion since these securities tend to generate meaningful cash flows. But like every other company, the profitability of gold miners depends on the price of the products they are selling, meaning that spot gold prices are a major factor in the cash flows of the underlying company. And with the evolution of the ETF industry, there are now a number of products that allow investors to add gold miner exposure to their portfolio with ease. Below, we outline the three most popular gold miner ETFs and which one will fit your investment objectives [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].

Market Vectors TR Gold Miners ETF (GDX)

Quick Stats (7/19/2012)

GDX is the largest and one of the most popular gold miners ETFs available on the market. With an average daily volume of just over 16 million shares, its high liquidity is arguably its most alluring feature. With its inception in 2006, GDX was the first fund to offer investors access to the lucrative world of gold miners. Although the veteran product appears to be the most popular choice among investors, its underlying holdings do pose some significant drawbacks for those looking to make a pure play on the gold mining industry. Many of the stocks in GDX’s portfolio are of companies that are involved in the mining of numerous precious and industrial metals in addition to gold. Despite its relatively diluted exposure to the industry, GDX still remains one of the largest equity ETFs in the world and continues to accumulate assets [for more gold news subscribe to our free newsletter].

GDX is Right for You if: You are an investors looking for a liquid play on the gold mining sector.

Market Vectors Junior Gold Miners ETF (GDXJ)

Quick Stats (7/19/2012)

GDXJ is the only product on the market that is specifically designed to provide investors access to a growing niche segment of the gold miners industry: junior gold miners. As the name “junior” implies, the fund invests in small and mid capitalization gold mining companies. Although small cap stocks are more volatile than their large cap counterparts, they do offer significant growth opportunities and higher potential for lucrative returns. Since inception, GDXJ has accumulated over $2 billion in assets, making it the second largest gold miner ETF available. The fund’s most attractive feature is perhaps its juicy dividend yield of 5.72%: only three other funds in the category make distribution payments, with the second highest yield coming in substantially lower at 2.18%. But similar to GDX, however, GDXJ does not offer “pure” exposure to the gold mining industry as many of its underlying holdings are heavily involved in silver mining as well as other metals. Although this drawback might discourage some investors, GDXJ does maintain a much deeper and more balanced portfolio than GDX with its 85 holdings in comparison to  GDX’s meager 31 stocks [see Why Warren Buffett Hates Gold].

GDXJ is Right for You if: You are looking for a small-cap play on the gold mining industry.

MSCI Global Gold Miners Fund (RING)

Quick Stats (7/19/2012)

Similar to GDX, this fund offers investors exposure to some of the largest gold mining companies in the world. Although there is a significant overlap in these two funds in terms of individual holdings, RING offers a deeper and slightly more diversified portfolio, consisting of just over 45 securities from a greater number of countries across the globe, including both developed and emerging markets. Additionally, RING holds the title of cheapest gold miner ETF with its expense ratio at a mere 0.39%. Despite being a newcomer to the market, making its debut in January of 2012, RING has already accumulated more that $33 million in assets and is quickly gaining popularity [see The Central Banks Are Buying Gold Like It's 1965].

SGOL is Right for You if: You are a cost conscious investor looking to save money while still allocating to this lucrative market segment.

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Disclosure: No positions at time of writing.

About Daniela Pylypczak

Daniela Pylypczak-Wasylyszyn is a regular contributor to CommodityHQ.com, where she primarily focuses on commodity producers equities. She is also an analyst for ETFdb.com, where she contributes articles and analysis each week. Since joining the team in 2011, Daniela has quickly grown to be one of the most widely-followed authors in the industry. Her articles are syndicated in a number of online publications, including Financial Advisor Magazine, Fidelity.com, and Yahoo! Finance. Daniela is also a contributor for TraderHQ.com and Dividend.com. Daniela graduated from DePaul University with a bachelor’s degree in finance and economics.
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Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

8 Responses to “Which Gold Miner ETF Is Right For You? GDX vs. GDXJ vs. RING”

  1. [...] Pylypczak for Commodity HQ suggests that GDX is an optimal trade for those seeking a liquid play on the gold mining sector. [...]

  2. [...] Market Vectors Junior Gold Miners (NYSEARCA:GDXJ): This ETF is designed to measure the performance of publicly traded small- and mid-cap companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver [see also Which Gold Miner ETF Is Right For You? GDX vs. GDXJ vs. RING]. [...]

  3. [...] Lead deposits are abundant in many regions around the world, and the metal is relatively easy to extract from the ground. Because it is widely used in construction and other industrial applications, lead has some appeal [...]

  4. [...] Lead deposits are abundant in many regions around the world, and the metal is relatively easy to extract from the ground. Because it is widely used in construction and other industrial applications, lead has some appeal [...]

  5. [...] Gold mining has certainly come a long ways from the images in the history books of the 49ers in California using their picks and shovels or of the Yukon Gold Rush of the late 1890s panning for gold in streams. Today, mining for gold is a multinational, multimillion dollar business taken up largely by big companies, such as Barrick Gold (ABX), using much more sophisticated methods and equipment than swinging a pick at a rock. That is because most of the surface gold, called alluvial gold, has been found and gold now must be mined from the earth [for more gold news and analysis subscribe to our free newsletter]. [...]

  6. [...] bonds or fixed income exposure, and has just 0.1% in equities. So where does all of his money go? Gold and silver miners. Mr. Paul has approximately 64% of his total assets invested in miners of both gold and silver, [...]

  7. [...] by international stocks, but still feature a surprising U.S. allocation of roughly 37%; most metals equity funds feature a great deal of international exposure with little left for domestic firms. Though [...]

  8. [...] comes primarily from mining activity, with total global production approximating to 2,560 tons. South Africa has historically accounted [...]

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