Trading on geopolitical concerns

The gold price has increased since North Korea started a missile testing program earlier this year.  The price of, gold has shot above US$1,300 as investors poured back into safe haven assets to protect themselves from the unknown.  That’s a sharp rise from the end of 2016 when gold traded at US$1,145.90. 

Investors are concerned about the catastrophic economic and financial consequences of an escalation between North Korea and its neighbours and the possibility of a US strike. This has been reflected in the rising price of gold bullion.

According to Barron’s, “gold is a no-brainer hedge against the risks of the unknown.”^[1]  Gold mining stocks provide leverage to the gold price. Therefore, it is no surprise that miners have enjoyed a surge. In August alone, the VanEck Vectors Gold Miners ETF (ASX code: GDX) has jumped 8.6%.

VanEck Vectors Gold Miners ETF (GDX)

Australian investors can potentially take advantage of the gold rally by investing in GDX. Available on ASX, GDX is the world’s largest gold miners ETF and gives investors instant access to a diversified portfolio of global gold mining companies in a single trade.

With nearly 50 years of experience managing gold equities, VanEck has the longest tenure among global asset managers in the gold sector.

Gold has historically been a safe haven for investors. In light of recent geopolitical events, and warnings by the world’s biggest hedge fund managers of a stock market downturn, GDX presents a unique and convenient opportunity for investors to capitalise on increasing gold bullion and miner prices.

Many Australian investors would have no exposure at all to the precious metal, yet Bridgewater’s Ray Dalio comments that investors should allocate 5% to 10% of their portfolios to  gold.^[2] 

IMPORTANT DISCLOSURE

^{Issued by VanEck Investments Limited ABN 22 146 596 116 AFSL 416755 (‘VanEck’). VanEck is a wholly owned subsidiary of Van Eck Associates Corporation based in New York, United States. VanEck Vectors ETF Trust ARBN 604 339 808 (the ‘Trust’) is the issuer of shares in the VanEck Vectors Gold Miners ETF (‘US Fund’). The Trust and the US Fund are regulated by US laws which differ from Australian laws. Trading in the US Fund’s shares on ASX will be settled by CHESS Depositary Interests (‘CDIs’) which are also issued by the Trust. The Trust is organised in the State of Delaware, US. Liability of investors is limited. VanEck Associates serves as the investment adviser to the US Fund. VanEck, on behalf of the Trust, is the authorised intermediary for the offering of CDIs over the US Fund’s shares and issuer in respect of the CDIs and corresponding Fund’s shares traded on ASX.}

^{This is general information only and not financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Investing in international markets has specific risks that are in addition to the typical risks associated with investing in the Australian market. These include currency/foreign exchange fluctuations, ASX trading time differences and changes in foreign regulatory and tax regulations.  Before making an investment decision in relation to the US Fund you should read the PDS and with the assistance of a financial adviser consider if it is appropriate for your circumstances. The PDS is available at www.vaneck.com.au or by calling 1300 68 38 37.}

^{Past performance is not a reliable indicator of future performance. No member of the VanEck group of companies or the Trust gives any guarantee or assurance as to the repayment of capital, the payment of income, the performance or any particular rate of return from the US Fund.}

^{An investment in the US Fund may be subject to risks that include, among others, competitive pressures, dependency on the price of gold and silver bullion that may fluctuate substantially over short periods of time, periods of outperformance and underperformance of traditional investments such as bonds and stocks, and natural disasters, all of which may adversely affect the US Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates that may negatively impact the US Fund’s return. Small- and medium- capitalisation companies may be subject to elevated risks. The US Fund’s assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.}

^{NYSE Arca Gold Miners Index® (‘GDMNTR’), a trademark of NYSE Group Inc. or its affiliates (‘NYSE’), is licensed for use by VanEck in connection with the US Fund.  The US Fund is not sponsored, endorsed, sold or promoted by NYSE and NYSE makes no representation as to the accuracy and/or completeness of GDMNTR or results to be obtained by any person from using GDMNTR in connection with trading the US Fund.}

^{[1] http://www.barrons.com/articles/gold-rush-trump-china-puts-the-bull-into-bullion-1484292769}

^{[2] https://www.cnbc.com/2017/08/29/hedge-funds-worried-about-north-korea-risk-braced-for-market-drop.html}