White Paper - SGDM

Including gold stocks to your gold allocation has the potential to boost returns while maintaining the portfolio diversification benefits of gold.

In a rising gold price environment, gold stocks have the potential to provide additional returns because:

  • The value of unmined gold reserves increases, making gold companies more valuable to investors
  • The profitability of gold companies can rise exponentially relative to the price increase for gold

Let’s look at an example of a company producing 1 million ounces of gold a year:

For illustrative purposes only.

In this illustration, an 18% increase in the price of gold translates into an 80% increase in profitability for the company.

Whatever the portion that gold represents in your portfolio, allocating 20% of it to gold stocks may improve the overall return potential. Let’s look at the historical returns during the three most recent gold market rallies.

Gold Rally #1 In the December 2000 to February 2008 gold rally, including gold stocks generated significant value, providing an additional 5% of performance on an annual basis.
Gold Rally #2 Following the 2008 financial crisis, adding gold stocks failed to generate incremental returns – the returns of gold and gold stocks were atypically comparable.
Gold Rally #3 Starting on January 1st 2016 to September 30, 2016, having 20% of your gold allocation in gold stocks would have resulted in cumulative performance of 38.87% compared to 23.96% if you just held gold.

Past performance is not indicative of future results.

Historically, gold stocks entail greater risk and price volatility than gold bullion.

Performance as of September 30, 2016

Total Expense Ratio of Sprott Gold Miners ETF is 0.57%.

Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. Call 866.675.2639 for current month end performance.
A fund’s performance for very short time periods may not be indicative of future performance. The recent growth in the stock market has helped to produce short-term returns for some asset classes that are not typical and may not continue in the future.

1 Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times.
2 Inception date of 07/15/2014.
3 The Underlying Index was created by Zacks Index Services (“Index Provider”) to provide a means of generally tracking the performance of gold and silver mining companies whose stocks are traded on major U.S. exchanges. An investor cannot invest directly in an index.