It has been a good year for gold ETFs so far, and they could continue to do well for the foreseeable future.
The price of gold has climbed 20% thus far in 2016 and gold miner stocks have jumped as much as 80% or more.
Many consider gold a storehouse of value during challenging economic times, and the precious metal has benefited from a “lower for longer” U.S. monetary policy by the Federal Reserve and negative interest rates around the globe.
Because of their low cost, accessibility and liquidity, gold ETFs are the ideal security for tracking the price of gold and for capturing the equity side with miners.
But after such a significant rise in gold, is there still opportunity for more upside? Will the Fed raise rates in June?
If the current softening economic conditions persist, there’s good reason to expect gold ETFs will continue outperforming the broad market indices.
So if you’re looking to add gold to your portfolio, here are three of the best gold ETFs to consider buying for the rest of 2016.
Best Gold ETFs for the Rest of 2016: VanEck Vectors Gold Miners ETF (GDX)
Expense Ratio: 0.52%, or $52 per $10,000 invested
If you want the best gold ETF for exposure to miners, VanEck Vectors Gold Miners ETF (GDX) is a solid choice.
The oldest gold ETF of its kind, GDX is an index fund that tracks the NYSE Arca Gold Miners Index, which covers 40 of the largest mining industry companies around the world.
Most of the holdings are large-cap North American mining stocks like Barrick Gold Corporation (USA) (ABX), Newmont Mining Corp (NEM), and Goldcorp Inc. (USA) (GG), but there are several mid-cap and international mining stocks in the mix as well.
Although GDX is up 73% in 2016, mining stocks may still have room for more gains, especially considering the fact that commodity-related companies scaled back operations to create more efficiency during the big correction in recent years.
Therefore, as gold prices rise, stocks for gold miners have the potential to increase as well.
Best Gold ETFs for the Rest of 2016: SPDR Gold Trust (ETF) (GLD)
Expense Ratio: 0.40%
For a pure play on the price of gold, the best gold ETF to buy is SPDR Gold Trust (ETF) (GLD).
Although GLD isn’t the cheapest gold ETF on the market, it’s the largest and most liquid, which is an important trait to look for in ETFs, especially ones that track commodity prices.
The investment objective for GLD is to track the performance of the price of gold bullion. Therefore, if you’re betting on the price of gold to go higher, GLD is an efficient way to do it.
And when a big trader like George Soros buys GLD in the first quarter of 2016, picking up shares of one of the best gold ETFs may be worth considering.
Best Gold ETFs for the Rest of 2016: iShares MSCI Global Gold Miners (RING)
Expense Ratio: 0.39%
If you want to make a big bet on gold miners in 2016, iShares MSCI Global Gold Miners (RING) may be the best gold ETF for you.
RING tracks the MSCI ACWI Select Gold Miners Investable Market Index, which consists of global stocks of companies that are in the gold mining business.
Unlike most other gold mining ETFs, RING concentrates its portfolio holdings on just 30 stocks, which can make for more pronounced price moves. For example, the year-to-date return for RING is 89%, which is ahead of two-thirds of funds in the precious metals category.
Although there may be plenty of upside potential remaining for gold and gold-miner ETFs for the rest of 2016, investors thinking of buying shares now should be cautious and patient regarding volatility that comes from the U.S. interest rate outlook. For example if the Fed signals a rate hike, gold ETF share prices will likely fall.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. However, he holds GLD for some client accounts. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.
