Gold prices are up almost 13% for the year. But there’s an underlying struggle for miners to continue excavating for the precious metal. Given this, it may take a diversified approach to get country exposure, which is inherent in a few Sprott ETFs.
In the meantime, gold investors are benefiting from the rally as capital markets are still hopeful a rate cut could happen before the year is over. Gold has started to retreat as of late, giving prospective investors an opportunity to buy the dip before resuming its upward trajectory if that’s indeed the case in the second half of 2024.
“The market is starting to increasingly expect the U.S. central bank to start its easing program. I suspect we might be getting some long positions getting installed into the market,” said Bart Melek, head of commodity strategies at TD Securities.
Miners Struggling to Extract Gold
Amid the rally, however, is the difficulties in mining for the precious metal. Conversely, mine production is up in 2024, but the overall trend the past decade tells a different story.
“We’ve seen record first quarter mine production in 2024 up 4% year on year. But the bigger picture, I think about mine production is that, effectively, it plateaued around 2016, 2018 and we’ve seen no growth since then,” WGC Chief Market Strategist John Reade said.
As reported by CNBC, data from the World Gold Council showed that production in 2023 only want up by half a percentage point. Compare that to year 2022, when it was 1.35% and 2.7% in 2020 — the year-over-year decline is apparent.
“I think the overwhelming story there is: after 10 years of rapid growth from around 2008, the mining industry is struggling to report sustained growth in production,” explained Reade.
This could put gold mining at the forefront, applying pressures on miners to produce and thus, make their contributions valuable. That said, investors may want to look at funds like the Sprott Gold Miners ETF (SGDM ) and the Sprott Junior Gold Miners ETF (SGDJ ).
SGDM seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large gold companies found on Canadian and major U.S. exchanges.
Alternatively, SGDJ tracks the Solactive Junior Gold Miners Custom Factors Index, which follows the performance of the small-cap precious metal companies. When large-cap equities move toward the upside, small-caps tend to follow with amplified moves, albeit with more volatility in a downturn.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
