Gold, and precious metals in general, are looking extremely cheap and continuing to be undervalued relative to the price of gold. The disparity between the market capitalizations of gold miners and the underlying commodity price of precious metals is extremely wide right now, and has created an environment where I view gold miners as one of the safest value plays in the market right now.
The VanEck Vectors Gold Miners ETF (TSX:GDX) is among my top picks for those looking for a way to play the gold sector using an exchange traded fund (ETF). This ETF holds a portfolio of high-quality gold miners, focused more on the large cap names with a diversified approach, holding a wide range of companies across the spectrum in this sector.
As mentioned previously, in the past, gold miners tended to track the price of gold pretty well. In recent years, investors have devalued miners relative to gold prices due to the lack of willingness of miners to control costs, with rising gold prices failing to transfer directly to the bottom lines of these miners as they should have in the past.
Some of this operational risk will always exist, however, the extent to which gold miners are discounted right now relative to the price of gold is the widest discount we’ve seen in three decades. For those looking for a way to play value in an ETF vehicle, this ETF is one for you.
Invest wisely, my friends.
