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Interesting article and approach to a miner ETF. It will be curious to see how it actually performs. The gold/XAU ratio is 16.71 (this is where the author talks about mining stocks undervalued relative to bullion). Note that historically (before the advent of the bullion ETFs, 5.0 was the equilibrium point - below which pointed to bullion and above which pointed to overweighting miners. The bullion ETF through this metric completely out of whack and while I haven't been following the trade, I don't think anyone has really quite figured out how to use it today. My best guess is that within your pm holdings, you should overweight miners relative to bullion. BTW, also for the record, the gold/silver ratio is 1/71 which points to overweighting silver to gold as the 'equilibrium' ratio here is historically 1/17 (more realistically 1/30-40).
While Sprott Resource's performance as a company is poor, this ETF's benchmark was co-developed with Zacks Investment Research. So it is not completely a Sprott endeavor. Also, while it's always possible to screw up managing any fund, in most cases if you agree with the design of an index, the tracking of it is fairly idiot proof. I think in this case the design makes some sense.
Rono, I agree with your analysis on the gold/XAU ratio and with the fact that since the advent of the bullion ETF the ratio is harder to use. Still, by most metrics miners seem cheap now. Could they get cheaper? Absolutely. So much depends on the price of the yellow metal.
Comments
Interesting article and approach to a miner ETF. It will be curious to see how it actually performs. The gold/XAU ratio is 16.71 (this is where the author talks about mining stocks undervalued relative to bullion). Note that historically (before the advent of the bullion ETFs, 5.0 was the equilibrium point - below which pointed to bullion and above which pointed to overweighting miners. The bullion ETF through this metric completely out of whack and while I haven't been following the trade, I don't think anyone has really quite figured out how to use it today. My best guess is that within your pm holdings, you should overweight miners relative to bullion. BTW, also for the record, the gold/silver ratio is 1/71 which points to overweighting silver to gold as the 'equilibrium' ratio here is historically 1/17 (more realistically 1/30-40).
And so it goes,
peace,
rono
While Sprott Resource's performance as a company is poor, this ETF's benchmark was co-developed with Zacks Investment Research. So it is not completely a Sprott endeavor. Also, while it's always possible to screw up managing any fund, in most cases if you agree with the design of an index, the tracking of it is fairly idiot proof. I think in this case the design makes some sense.
Rono,
I agree with your analysis on the gold/XAU ratio and with the fact that since the advent of the bullion ETF the ratio is harder to use. Still, by most metrics miners seem cheap now. Could they get cheaper? Absolutely. So much depends on the price of the yellow metal.
Thanks, Heezsafe. Haha.
Best,
Lewis