Put a RING on it With This ETF

July 23, 2013 2:39 pm
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Put a RING on it With This ETF

You might have heard that the good times for gold are back.

At least temporarily.

Bullion enjoyed its best intraday performance in over a year Monday, a move that was strong enough to put the SPDR Gold Shares (NYSE: GLD) within pennies of its 50-day moving average, something GLD has not traded above since early this year.

Embattled gold miners are getting in on the act. Or maybe, for once, they are leading the way. The Market Vectors Gold Miners ETF (NYSE: GDX) now resides somewhat comfortably above its 50-day line.

In the past month while GLD is up four percent, GDX gained 15.5 percent heading into the startof trading Tuesday. All that after gold miners had been maligned and at least five gold mining ETFs, including the popular Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) and the Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT), were reverse split earlier this year.

Should this rally gold miners rally be sustainable, investors may want to consider an ETF with RING).

RING debuted at the end of January 2012 and is a direct competitor to GDX, the king of gold mining ETFs. The two have plenty similarities and that is nice way of saying that, until the past few weeks, both have been destroyers of capital as both down more than 40 percent year-to-date.

Investors that bank on GDX are, whether they know it or not, are banking on Goldcorp (NYSE: GG) and Barrick (NYSE: ABX) as those stocks combine for 25 percent of that fund’s weight. With RING, that number rises to 28 percent.

A key difference between the two ETFs, in addition to the fact that RING has nine more holdings at 39 than GDX’s 30, is that the latter offers some decent exposure to silver miners. Silver Wheaton (NYSE: SLW) is a top-10 holding in GDX while Cia de Minas Buenaventura (NYSE: BVN) receives a weight of 3.7 percent. Pan American Silver (NASDAQ: PAAS) is 2.2 percent of GDX’s weight.

Buenaventura is a RING holding, too, but overall that ETF is light on pure-play silver miners. In theory, the difference in silver miners allocations should make a noticeable difference in terms of performance between GDX and RING. Although silver miners have joined in on the precious metals mining resurgence with the Global X Silver Miners ETF (NYSE: SIL) surging 20 percent in the past month, that has not lead to a significant performance gap between GDX and RING. The edge goes to GDX, but the result is a gain of 15.54 percent to 15.45 percent for RING.

Both funds are inexpensive on valuation with GDX sporting a price-to-book ratio of 0.95 at the end of June while RING’s was 0.89. Deciding between the two is actually not difficult. GDX’s average daily volume of over 26.1 million shares means it is the superior bet for active traders, but RING’s 0.39 percent expense ratio (13 basis points cheaper than GDX’s) indicates the fund is a credible option for those daring enough to make long-term bets on gold miners.

For more on ETFs, click here.

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