FACTORS THAT FAVOR GOLD AND GOLD STOCKS IN THE CURRENT ENVIRONMENT:
Negative interest rates have historically been supportive of the price of gold.
In Q3 2016, there was $11.6 trillion of negative yielding bonds.
In response, there has been a significant sentiment shift in favor of gold. ETFs posted significant increase in fund flows, 18.3 million ounces YTD.
Historically, in gold bull markets gold equities have outperformed gold bullion. The ratio of gold equities to gold today is less than half of its historical average.
During the recent gold bear market, gold companies have reduced their operating costs and capital expenditures. All-in senior sustaining cash costs have declined by 24%, from $1,227 per oz. in Q2 2013 to $930 per oz. in Q2 in 2016.
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:
In this illustration, an 18% increase in the price of gold translates into an 80% increase in
profitability for the company
The average 24 month return of gold stocks following the market bottom of the last 7 bear markets was 117%.
Two Unique ETFs to Invest in Gold Stocks
- Seeks to outperform purely passive representations of the gold and silver mining industry
- Uses transparent, rules-based methodology designed to overweight gold stocks with attractive investment merits relative to the other stocks in the index
- The stock selection and index weighting criteria were co-developed by Sprott Asset Management, a leading, long-time gold sector investor, and Zacks Index Services
- Stocks weighted in the index based on quarterly revenue growth and long-term debt to equity
- Reconstituted quarterly
- Stocks weighted in the index based on revenue growth and price momentum
- Reconstituted semi-annually
Sprott ETFs provide investors with access to innovative and unique indexes that are designed to outperform passive market cap-weighted offerings. Each Index is designed using specific Factors that MATTER™ for a particular strategy. These customized factors are selected because they have historically shown correlation to stock performance.