There’s lots of talk about gold right now — and not just in the wake of the Olympics in Sochi.
The Market Vectors Gold Mining ETF (GDX) fell more than 40% in 2013 but has risen about 20% through mid-February. And the Market Vectors Junior Gold Mining ETF (GDXJ) is up about 30% this year after slipping 53% in 2013.
Simona Gambarini, associate director of research for ETF Securities in London, believes it’s time to get back into these equities. (Jeffrey Gundlach of DoubleLine also voiced his support for gold miners earlier this year during a webinar.)
While many of the leading miners’ stock prices and industry ETFs have dropped by 50% or more from their peaks in mid-2011, their prices are attractive, experts say.
In a recent report, Gambarini explained: “With gold mining stocks trading at the lowest level since 2008, we believe they have reached a point where upside potential now far outweighs downside risks, making this a good entry point for investors with medium-term time horizons.”
ETF Securities estimates that gold miners still may have $113 billion of reserves to write down, but this situation has already been reflected in its price movement.
“On our estimates, gold miners’ shares are currently trading at a 4% discount to their book value, and many are now trading at attractive long-term accumulation levels,” Gambarini noted.
Spot gold traded seemed to have stabilized at around $1,250 an ounce earlier this year, but gold for April delivery traded at nearly $1,317 on Feb. 20.
With general equity market sentiment expected to remain positive, she says, gold miners “appear to be in a position to outperform gold.”
In a phone interview with ThinkAdvisor, Gambarini cited several trends supporting her call.