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- December 1, 2016; Vol. 3, Number 12

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Not All That Glitters: Gold miners are not a substitute for gold ETFs

by Tom Lydon

As gold prices strengthened this year, many investors turned to the undervalued gold miners segment to capture the strong returns. However, gold exchange traded fund investors should keep in mind that gold mining stocks are no substitute for the hard asset.

When gaining exposure to gold, investors should consider gold miners as a distinct category set aside from physical gold allocations within a diversified investment portfolio to maximize gold bullion’s investment and risk management characteristics.

Since gold miners depend on industry competition and specific management factors beyond the price of physical gold, producer stock prices may be affected by additional factors outside of the precious metal. Specifically, miner valuations are dependent on profitability, operational costs, financial health and other specific risks. Moreover, miners may also engage in activities that limit shareholder participation in gold, such as gold hedging, cost cutting mea

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