Despite Rally, Gold Still Presents a Strong Investment Case

In cases where an asset is in the midst a strong rally, investors are typically gripped with the fear that they already missed out on the major move. That doesn’t appear to be the case with gold, which should be approached with a strategic allocation strategy in mind as opposed to simply chasing gains.

“In our view, further substantial upside remains, and we believe gold and precious metals should constitute core strategic investment positions, similar to the conventional wisdom of the 1960s and 1970s,” said Sprott Inc managing partner and Sprott Asset Management senior portfolio manager John Hathaway in a Sprott Gold Report. “However, given sizzling recent gains in the precious metals sector, shakeouts will inevitably occur.”

The same can be said for gold mining equities. Those, according to Hathaway, still have room to run. He supported the investment case for gold equities based on their relative undervaluation, minimal investor participation at the institutional as well as retail level, and the potential for gold to move higher.

“In our opinion, mining stocks are transitioning from pariah status to momentum plays as leverage to a bullish outlook for gold prices,” Hathaway added. “Despite strong gains this year, precious metals equities remain modestly valued.”

The Active Advantage

If gold and associated precious metals like silver continue to push for more record highs, they should take advantage of mining exposure with an actively managed fund such as the Sprott Active Gold & Silver Miners ETF (GBUG). As its fund name explicitly states, GBUG adds both gold and silver mining equities for dual exposure in both precious metals. The active management allows portfolio managers to tailor its holdings to suit current market conditions.

“Sprott’s active portfolio managers have the potential to add value through selective stock picking and thoughtful portfolio construction,” Hathaway noted. “The 171% average performance spread between top and bottom-tier precious metals miners over the past five years underscores the potential advantage of active management (see Figure 5).”

The obvious advantage of the dual exposure is the added diversification to a portfolio. While gold is lauded as a store of value, silver also has an industrial component with its strong electrical conductivity properties.

Figure 5. The Active Management Opportunity: Gold Miners Have a Wide Range of Performance

Source: Bloomberg and FactSet as of 12/31/2024. Gold Miners (GDM) represents the NYSE Arca Gold Miners Index (GDMNTR INDEX) and the ~45 constituents of GDX US Equity, which tracks the GDMNTR Index. You cannot invest directly in an index. Past performance is no guarantee of future results. 

For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Content Hub.

An investor should consider the investment objectives, risks, charges, and expenses carefully before investing. To obtain a Prospectus, which contains this and other information, contact your financial professional or call 888.622.1813. Read the Prospectus carefully before investing, which can also be found by clicking one of the links below.

Past performance is no guarantee of future results.  One cannot invest directly in an index.

Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.

Sprott Asset Management USA, Inc. is the Investment Adviser to the ETFs. ALPS Distributors, Inc. is the Distributor for the ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc. or VettaFi.
Exchange Traded Funds (ETFs):  SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM, SGDJ, SLVR, GBUG, METL
Physical Bullion Funds:PHYS, PSLV, CEF, and SPPP.

Gold and precious metals are referred to with terms of art like store of value, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.

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