Battle Metals vs. Miners: Gold Edition 2012

Gold investors were in for a wild ride this year, as several major economic events thrust the precious metal into some rather volatile swings. Between the announcement of QE3, the President’s reelection, and the fiscal cliff talks, gold’s performance was all over the board, though the metal managed to post solid but relatively lower gains on the year. As a result, two popular exchange-traded funds saw a lot of activity in 2012: State Street’s SPDR Gold Trust (GLD) and Van Eck’s Market Vectors TR Gold Miners ETF (GDX). A close look at the performances on a year-to-date basis shows just how vastly different these two approaches to the gold market can be [for more gold ETF news and analysis subscribe to our free newsletter]:

2012 Trend: Gaps Between Metals and Miners

In almost all precious metal categories, significant gaps in performances between spot prices and commodity producers have become commonplace in 2012. Though many miners have benefited from the general rise in metal prices, the boost has not been enough to compensate for the painfully high operational costs.

GLD Comes Out on Top

The State Street SPDR Gold Trust (GLD), which is designed to track the spot price of gold bullion, has fared relatively well this year despite a major slump in the summer months. For the 2012 fiscal year, GLD gained 6.6%, a rewarding yet relatively low return for the precious metal. In terms of assets, GLD has seen over $5.7 billion in net inflows, making the fund’s grand total of assets under management an impressive $72 billion and counting.

GDX Takes a Major Hit

This popular fund allows investors to put an equity spin on the gold space by targeting some of the top names in the gold mining industry. GDX’s portfolio consists of roughly 32 individual holdings with over two-thirds of total assets allocated to the top ten holdings, including Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM) and Yamana Gold (AUY) [see also Jim Rogers: Silver Is a Better Investment Than Gold].

Last year, GDX tumbled over 8.8% as miners endured a tumultuous year. Sour earnings reports due to high operational costs have had dismal effects on the majority of stocks in GDX’s portfolio, though the fund still managed to attract more than $1.5 billion in inflows in 2012.

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Disclosure: No positions at time of writing.