Gold's Stratospheric Ascent Reinvigorates The Narrative For Sprott Precious Metal Mining ETFs

While elite technology companies may be dominating headlines, the sector that has consistently delivered robust returns is also one of the oldest. With gold’s remarkable ascent above the psychologically and technically significant $4,000 level, the precious metal complex has once again accelerated to the forefront — and experts assert that the rally may only be in the early innings.

Historically, gold has long served as a universal store of value. As one of the relatively few assets commanding intrinsic value, gold has represented a hedge against economic instability. At the same time, this attribute hinders the metal’s financial utility under normal cycles. Because gold is obviously a static commodity, it doesn’t natively offer yields nor engage in accretive functions like earnings generation.

As such, often a compelling catalyst must materialize to convince investors that a defensive asset is a viable approach over a business enterprise. Given the challenges facing consumers, many have already made their choice.

However, what’s intriguing about the gold market is that the investment narrative extends beyond the metal’s spot price. Sure, headlines about record-breaking bullion sales intrigue readers. However, the returns on individual gold miners have been explosive, with some enterprises witnessing a more than doubling in market value on a year-to-date basis.

Functionally, gold miners represent an alternative to pure exposure to the commodities space. While a lift in the precious metal’s spot price may boost the underlying financial picture, miners are first and foremost business enterprises. Thus, they also operate under distinct fundamentals.

Still, the mining complex is notorious for its extreme volatility. Subsequently, financial services provider Sprott Inc. (NYSE:SII) has created several convenient products for everyday investors. Structured as exchange-traded funds, these vehicles spread risk across a wide canvas of carefully vetted names, allowing market participants to open positions with confidence.

Sprott ETFs Offer A Wide Range Of Powerful Solutions

Thanks to fundamental factors aligning favorably for the gold market, several experts have sounded off on potential price targets. Among them, market veteran Ed Yardeni — who previously (and correctly) stated that the metal would hit $4,000 this year — anticipates that gold will reach $5,000 by 2026.

Even better, Yardeni remarked in an emailed note to Benzinga that if the metal continues on its current path, “it could reach $10,000 by the end of the decade.”

Driving the bullish narrative would be sharply rising concerns about economic stability and the rapid erosion of the dollar’s value. Adding to the optimistic framework, gold’s explosive rally has translated into unprecedented demand from retail investors, leading to significant gains in Sprott ETFs and other sector-focused vehicles.

As if the surrounding euphoria wasn’t enough, some analysts are convinced that the current gold rally is merely laying the foundation for future explosive growth. According to economist Peter Schiff, the precious metals complex is effectively tethered to an ascending channel because the “dollar is not going to stop going down.”

Primarily, Schiff makes the case for gold reaching up to $10,000 per ounce — but also believes that $20,000 is not out of the question.

Investors wanting to diversify their precious metals portfolio to include the mining complex may consider Sprott Gold Miners ETF (NYSE:SGDM). Focused on senior producing mining enterprises, the SGDM ETF includes the industry stalwarts, such as Newmont Corp. (NYSE:NEM) and Barrick Mining Corp. (NYSE:B). It also features exposure to royalty and streaming specialists such as Wheaton Precious Metals Corp. (NYSE:WPM) and Franco-Nevada Corp. (NYSE:FNV).

Of course, many gold aficionados can’t resist taking long-shot odds for the possibility of robust returns. For a smarter approach to speculation, market participants may consider Sprott Junior Gold Miners ETF (NYSE:SGDJ). Focused on junior miners with a market capitalization between $200 million and $2 billion, the SGDJ ETF aligns with a more adventurous perspective. Names under the fund’s umbrella include Endeavor Silver Corp. (NYSE:EXK) and NovaGold Resources Inc. (AMEX:NG).

Finally, those seeking to fully extract the Sprott advantage can discover one of the firm’s latest products: Sprott Active Gold & Silver Miners ETF (NASDAQ:GBUG). Actively managed by the financial service provider’s asset management team, GBUG leverages over four decades of specialized leadership in precious metals investments. Furthermore, because of the asymmetry between bullion pricing and mining valuations, GBUG aims to identify deeply undervalued opportunities.

Technical Analysis Of Sprott’s Key Precious Metal Funds

For investors seeking enhanced returns in the resource space, it’s important to understand the fundamentals, which provide critical context. With gold specifically, broader economic and monetary considerations, combined with lingering uncertainties, have contributed to the precious metal’s explosive rally. Furthermore, with supplies strained from miners desperately attempting to feed record-breaking demand, individual gold enterprises have witnessed significant upswings.

To make sense of the immediate ebb and flow of the precious metals market, investors have often turned to technical analysis — the study of chart patterns and trends to better predict where the target security or asset may head next. More art than science, technical analysis may be best thought of as the psychological indicator of the market.

The SGDM ETF: One of the strongest precious metal funds, Sprott’s SGDM fund has gained over 125% on a year-to-date basis.

• Reflecting the current strength of the gold bullion market, SGDM stands firmly above the 50-day and 200-day moving averages, as well as the 20-day exponential moving average.
• Volume has picked up in September and in the current month relative to levels seen during the summer, which potentially indicates confirmation of sustained optimism.

The SGDJ ETF: Another heavy hitter within Sprott’s portfolio, the SGDJ ETF has gained over 127% since the beginning of this year.

• Momentum has been accelerative in the trailing six months, with SGDJ more than doubling in value. For comparison, the SGDM moved up 79% in the same frame.
• Volume has been noticeably elevated in the last two months, a sharp contrast to the lull witnessed during the summer season.

The GBUG ETF: Making its public market debut in late February of this year, the GBUG ETF has almost doubled in value.

• Momentum has also been palpable in the trailing half-year period, with GBUG gaining over 96%. In the past 30 (calendar) days, the active fund has gained just under 16%.
• As with the other funds, GBUG has witnessed a significant spike in accumulative volume in September and October, potentially indicating sustained interest in gold.

Featured image by Soofia Tailor on Pixabay.