Canadian investors who have bought into the VanEck Vectors Gold Miners ETF (TSX:GDX) have done very well in 2020, posting gains of almost 25% in a year when stock markets everywhere treaded water due to heavy selling in the first quarter of this year as the pandemic took hold of the economies of most countries around the world.
I think 2021 could be another banner year for this exchange traded fund (ETF), as there are a number of bullish catalysts that are taking hold right now. The first key catalyst investors should keep their eyes on is the strength of gold miners’ balance sheets. This higher gold price environment has greatly improved the wiggle room these miners have when it comes to liquidity and ongoing capital needs.
Fewer debt raises and higher levels of debt repayment could pave the way for increased dividend distributions and more growth on reserves that may have been unprofitable a few years ago.
For gold bulls who, like myself, believe gold is simply taking a breather right now and is still in the middle innings of a bull market, buying gold miners right now is a great idea. This ETF offers a broad portfolio of some of the best gold miners out there, at a relatively low management expense ratio (MER). This is one of the best ways any investor can gain exposure to the leverage gold miners provide to the price of gold and hedge portfolios accordingly in this time of sky-high valuations across most sectors.
Invest wisely, my friends.
