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Tickers in this Article: GDXJ, GDX, XME, IAU, CDE, SSRI, AMEX:NGD, GLD
Investors just can't get enough gold. The yellow metal is up nearly 26% this year and reached a record high of $1,117.80 an ounce. Market strategists predict that massive inflation will result from all the extra monetary liquidity floating due to the world's various stimulus plans. Gold is often seen as a hedge, in good times and bad, against inflation and uncertainty. The precious metal has taken on a much greater importance in individual investors' portfolios as inflationary worries persist. IN PICTURES: 7 Tools Of The Trade

Both the iShares COMEX Gold Trust (NYSE: IAU) and the SPDR Gold Shares (NYSE: GLD), which each hold the physical metal and represent one-tenth of an ounce of gold, have exploded in recent months. Year to date, GLD has seen a $12.5 billion net inflow of assets, and the fund is currently the second largest exchange-traded fund (ETF). These funds may still have some room to run, but greater returns may lie with those who physically dig the stuff out of the ground. (For related reading, see Getting Into The Gold Market.)

Playing With Picks And Shovels
Equity-based mining ETFs have outperformed bullion by leaps and bounds over the course of the year. Year to date, the Market Vectors Gold Miners ETF (NYSE: GDX) is up nearly 47% versus the SPDR gold gain of 25.28%. Stretching this out even further to a trailing 12 months, the Gold Miners produced gains of 129%, and the broader-based SPDR S&P Metals & Mining (NYSE: XME) rallied 79%. GLD returned 50% by comparison. A new index and corresponding ETF launched by Van Eck helps tap into growth in the smallest mining companies.

The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) allows investors to participate in one of the real catalysts for expansion in the mining sector. Serving as exploration companies, junior mining stocks search for new mineral deposits and are a major source of future mine supply. Juniors are critical in the early stages of a new deposit, bridging the long lag time between when a new claim is found and when it is brought into production. These companies may or may not operate physical mines and often own swaths of untested property. Major producers see the juniors as a way to add to their overall reserves and will often partner with or buy out these mid-tier producers. (For more, see Strike Gold With Junior Mining.)

Inside The New ETF
The index on which GDXJ is built has performed amicably so far this year, returning 92.4% to the quarter ending October 30. To be included in the index, miners must receive or have the potential to generate at least 50% of their sales from gold and/or silver mining. Market cap requirements are at least $150 million with a trading volume of at least 250,000 shares a month over the last six months. The fund holds 38 of the most liquid and largest junior mining stocks with Coeur d'Alene Mines Corp. (NYSE: CDE), Silver Standard Resource (Nasdaq: SSRI) and New Gold (NYSE: NGD) rounding out the top three holdings. The fund is mostly domiciled in North America, with Canada accounting for 63% of the listed stocks. Australia, South Africa and China also make appearances. Expenses for the new fund run 0.68% a year. Most junior miners do not pay dividends; however, the fund has potential to return some nice capital gains distributions to shareholders as the nature of these stocks suggests that buyouts from larger firms are the norm.

Bottom Line
With real worries about inflation plaguing investors' minds, gold prices have been soaring. With so many choices available for the individual retail investor, the yellow metal has taken on a new importance in many portfolios. While holding actual bullion may take precedence, investors may want to diversify into the companies that actually pull the metal from the ground. Junior mining stocks offer a way to play the emerging growth in the industry, and the new ETF from Van Eck is the simplest way to do that.

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