The South African Rand And Gold Miner ETFs
October 10, 2012
Going back to the currency risk, these two funds also avoid exposure to the rand. But they take on the risk of holding firms in their infancy. In other words, you are trading one risk (currency), for another (viability).
That trade-off hasn’t been worthwhile, as GDXJ and GLDX were the two worst performers since March—even after accounting for the negative impact of the rand’s free fall on the broader portfolios of funds like the Market Vectors Gold Miner ETF (NYSEArca: GDX) and the Global X Pure Gold Miners ETF (NYSEArca: GGGG).
Moving forward, it remains to be seen if there will be any resolution to the labor disputes in South Africa. If the negotiations and violence are protracted, the rand’s sell-off could continue indefinitely.
Unfortunately, those looking to play a run-up in gold prices via the equity market will have little shelter from the storm unless they shift gears and buy the metal itself, or are comfortable making a higher-beta bet via the riskier, early-stage mining firms.
If only it were easier.