Gold Stocks and ETF's Compared to Bullion

We read all sorts of articles telling us we should invest in gold bullion, coins, stocks, etf's or mutual funds. We know that gold bullion and non-numismatic gold coins will follow the price of gold, the only difference being the percentage markup which can be from 1-20% or more depending on type, size and quantity of coin/bar purchased.

I decided to check a bundle of gold stocks and ETF's (Exchange Traded Funds, which act like and can be purchased like a stock, but are supposed to track the price of gold directly) and see how they fared against the spot price of gold. I arbitrarily chose October 1, 2009 as a start and October 1, 2010 as a finish date.

New York Spot Gold closed on 10/1/09 at $999.90 and 10/1/10 at $1318.60 for a one year gain of 32%.

I looked at 4 ETF's:
SPDR Gold Trust (GLD) (+32%)
Market Vectors Gold Miners Fund (GDX) (+31%)
Central Gold Trust (Canada)(GTU) (+29%)
Proshares Ultra Gold (UGL) (+64%)

Three of them are supposed to track gold, while the Proshares Ultra Gold is supposed to double the move of the spot gold price and that is pretty much what each of them did. With the Exchange Traded Funds, you can buy them just like a stock, so they will cost about $10 to buy and $10 to sell, depending on the broker you use. Additionally, there is a fee for administration and expenses for running the ETF which seems to be in the 1% area and is reflected in the share price.

I took a look at several common gold mining stocks as well:

Northern Dynasty (NAK) (+25%)
Newmont Mining (NEM) (+50%)
NovaGold (NG) (+82%)
Gold Fields Limited (GFI) (+14%)
Gold Corp (GG) (+14%)
Gold Reserve Inc (GRZ) (+63%)
Hecla Mining (HL) (+54%)
Barrick (ABX) (+30%)
AngloGold (AU) (+22%)
Cameco (CCJ) (+6%)

There is a much wider spread in results in the stocks, due in part to cost of mining the gold which can vary widely, as well as things like weather, political actions and economic variables like labor disputes.

Overall, it would seem like ETF's can follow gold prices far better than gold stocks without all the hassle of storage that comes with buying and owning the physical metal.


Technorati Tags: Gold Stocks Gold ETF'sGold Bullion CoinsGold Investing