Gold mining attracts enormous retail trading interest even though the gold bull market ended in 2010. Traders can play individual gold miners' profitably if they do their homework, but investing in sector exchange traded funds (ETF) offers an easier alternative, with broad exposure to the industry at different capitalization levels. Many investors pass on physical gold and gold futures, preferring exposure to the gold mining industry through ETFs and less liquid competitive instruments.
Some notable gold mining ETFs include the VanEck Vectors Gold Miners ETF (GDX), the VanEck Vectors Junior Gold Miners ETF (GDXJ), the iShares MSCI Global Gold Miners ETF (RING), the VanEck Vectors Junior Gold Miners ETF (GDXJ) and the Direxion Daily Gold Miners Bear 3X Shares (DUST). All information here was current as of Nov. 20, 2018.
VanEck Vectors Gold Miners ETF
The VanEck Vectors Gold Miners ETF seeks to replicate NYSE Arca Gold Miners Index (GDMNTR), which tracks the overall performance of companies involved in the gold mining industry. GDX has a $750 million market capitalization threshold that eliminates junior miners and other smaller sized operations.
The fund's average annual return over 10 years is -0.43%, and its expense ratio is 0.53%. Retail traders and traditional funds dominate this market, with professionals more likely to seek direct plays through SPDR Gold Shares (GLD) or the futures market.
The fund added international exposure to its portfolio in 2013 to reduce the impact of currency fluctuations. More than half of the ETF's $8.58 billion net assets are invested in Canadian companies.
VanEck Vectors Junior Gold Miners ETF
Investors can gain exposure to small-cap companies involved in gold mining through the VanEck Vectors Junior Gold Miners ETF (GDXJ). The fund seeks to replicate Global Junior Gold Miners Index (MVGDXJTR), which aims to track the performance of small-capitalization companies that are involved in both gold and silver mining. Canadian companies comprise about 45% of the fund’s portfolio, and its top 10 holdings comprising about 43% of its $4.27 billion in net assets.
The fund's average annual return over five years is -5.16%, and its expense ratio is 0.54%. This instrument is considered highly speculative because many junior gold operations have strong prospects but limited revenues.
iShares MSCI Global Gold Miners ETF
This fund seeks to track the MSCI ACWI Select Gold Miners Investable Market Index, which offers exposure to global companies that earn a majority of their revenue from gold mining. Nearly half of the fund's $178.26 million in net assets are invested in Canadian companies, followed by the United States with 16.56% and Australia with 13.06%.
The iShares MSCI Global Gold Miners ETF's average annual return over five years is -6.79%, and it has a relatively low expense ratio of 0.39%.
Leveraged Gold Mining ETFs
Two leveraged ETFs dominate the mid and high capitalization gold mining group, Direxion Daily Gold Miners Bull 3X Shares (NUGT) and Direxion Daily Gold Miners Bear 3X Shares (DUST). NUGT has an expense ratio of 1.20%, and DUST has an expense ratio of 1.08%.
Both ETFs seek daily returns, exposing them to the impact of contango and backwardation. NUGT seeks to provide daily investment results of three times, or 300%, the performance of the NYSE Arca Gold Miners Index. DUST seeks to provide daily investment results of -300% the return of the same benchmark index.