Despite the fact that cryptocurrencies appear to be taking the wind out of the sails of the gold trade of late, I do think a bullish argument exists for owning gold over the long-term. This asset class is not only a store of value but a portfolio hedge with negative correlation to real rates and the U.S. dollar. I’m bearish on both real rates and the strength of the U.S. dollar right now, so gold is my preferential way to play this trade.
Gold miners, specifically, offer higher leverage to gold prices and are my top choice right now to gain maximum leverage to gold prices. I think gold has room to run significantly higher through the near to long-term, as I see stimulus becoming the new norm.
I think we’re entering a new era of modern monetary policy in which interest rates will continue to be forced near zero and budget deficits won’t matter. In this context, gold should outperform, especially if one expects inflation to take hold (making real rates even more negative).
One exchange traded fund (ETF) I think best captures a broad and diverse group of miners is the VanEck Vectors Gold Miners ETF (TSX:GDX). This ETF provides investors with heavy levels of exposure to the best gold and silver miners out there, and is a great diversification tool at a reasonable fee of around 0.5%.
I would highly recommend other gold bulls check this ETF out and consider playing miners rather than bouillon, if one wants maximum exposure to the rising price of gold.
Invest wisely, my friends.
