3 Gold ETFs to Profit Big in Uncertain Times

Trump and Gold go hand in hand

gold ETFs - 3 Gold ETFs to Profit Big in Uncertain Times

Source: Jeremy Vohwinkle via Flickr (Modified)

While Hillary Clinton and the Democrats were not thrilled with a Donald Trump presidential victory, Gold was beyond ecstatic. As the final polls kept ticking in, gold managed to surge to highs not seen in weeks. Overnight, futures gained nearly 5%. During the day after the election, it hit a six-week high of $1,338 an ounce.

3 Gold ETFs to Profit Big in Uncertain Times

While those gains have been pared back since then, the name of the game remains the same: uncertainty. Under Donald Trump, who has provided a lot of ideas but few details thus far, expect a lot more uncertainty in the markets going forward.

Wall Street was pricing in a Hillary win and all the things that come with it. And a big piece of that was stability. At bare minimum, you knew what her policies were. With Trump, some of his potential actions remain a tad bit murkier. And that is exactly the kind of environment shiny stuff thrives in.

With that in mind, during the next year or so, as Trump starts his presidency, it could continue to rise on the continuing uncertainty of administration. According to Societe Generale, that surge could send it up into the $1,450 to $1,500 an ounce range. If not higher as recessionary pressures grow.

Given the potential for a nearly 20% gain in a short amount of time, the time to add some gold to your portfolio could be now. Here are three gold ETFs that will help you do just that.

Gold ETFs to Buy: iShares Gold Trust(ETF) (IAU)

Gold ETFs to Buy: iShares Gold Trust(ETF) (IAU)

Expenses: 0.25% or $25 per $10,000 invested

If you’re looking for the ultimate insurance against uncertainty, then buying gold ingots/coins and chucking them into a vault is still the best play. If you’re looking for simple portfolio insurance, rather than a physically-backed gold ETF is a lot easier. And the iShares Gold Trust(ETF) (NYSEARCA:IAU) is the top choice here.

As a physically backed gold ETF, IAU stores actual slabs of the precious metal in a vault on behalf of investors. Each share of the fund is backed by one one-hundredth of an ounce. The really beauty for investors is that this ETF makes owning the gold beyond simple. Buy one hundred shares and you have one ounce of the precious metal in your portfolio.

Owning it is as easy as placing a trade. There’s no need for vaults, insurance or the other hassles that come with owning bullion.

And while it’s not officially part of iShares core line-up of funds, it is priced like it is. Expenses for IAU run at just 0.25% or $25 per $10,000 invested. That’s about half of what the other popular gold ETF — the SPDR Gold Trust (ETF) (NYSEARCA:GLD) — charges.

Overall, for investors wanting to add some glitter to their portfolio, the IAU is the top way to do just that.

Gold ETFs to Buy: VanEck Vectors Gold Miners ETF (GDX)

Gold ETFs to Buy: VanEck Vectors Gold Miners ETF (GDX)

Expenses: 0.52%

When it comes to gold, the firms that dig the metal out of the ground have two special advantages.

For starters, their fixed costs allow them to realize a better return when it rises. A 1% gain in the price of gold, translates into 2% gain in profits. This allows them to be leveraged plays on the price of gold. And since the precious metal is rising, the miners will benefit in spades.

Secondly, they have the ability to pay dividends. You can’t get any cash flow out of bullion. And with many having price-linked dividend policies, a bump in its price will result in higher yields for the gold miners.

The easiest way to play the miners is the $10.9 billion VanEck Vectors Gold Miners ETF (NYSEARCA:GDX). GDX tracks the largest gold mining stocks from around the world. All the heavyweights are there: Barrick Gold Corporation (USA) (NYSE:ABX), Compania de Minas Buenaventura SAA (ADR) (NYSE:BVN), Kinross Gold Corporation (USA) (NYSE:KGC), etc. A total of 53 different mining stocks.

GDX is already up big this year. But the entire sector spiked hard on the Trump win. If the uncertainty and gold keeps rising, so will GDX.

Gold ETFs to Buy: Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI)

Gold ETFs to Buy: Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI)

Expenses: 0.65%

For investors looking for real income and protection, gold can deliver. That is, if you bet on the right horse. The Credit Suisse X-Links Gold Shares Covered Call ETN (NASDAQ:GLDI) is that high income horse.

GLDI is a unique play on the precious metal. The ETF owns shares of the super-popular and previously mentioned GLD. GLDI will then sell monthly out-of-the-money covered call options on the GLD shares it holds.

These call options provide GLDI with an up-front premium for the right to buy the shares at a set level. GLDI takes these premiums and distributes them to its investors as hefty cash dividends.

The strategy does work and produces some big-time dividends without any added leverage. Currently, the yield on the ETF is a whopping 14.06%. The big asterisk here is that the distributions are a tad lumpy, thanks to the difference strike price of the underlying options contracts. And surging prices of the precious metal can cap the upside of the gold ETF. But that’s a small price to pay for a high yield.

Expenses for GLDI run at 0.65%.

As of this writing, Aaron Levitt was long IAU.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/3-gold-etfs-profit-big-uncertain-times/.

©2020 InvestorPlace Media, LLC