How to invest in gold miners?

saveonarola

Can anyone recommend a good way for a beginner to invest in gold-mining shares? Basically, I'm looking for as broad-based a selection as possible. If there was a passive vehicle for tracking the shares of gold-mining companies, I would go for that, but I don't imagine such a thing exists, does it?

Can anyone recommend any specific funds? Not based on past performance, or hunches about what countries/miners are going to do well, but simply on reasonable costs and being widely available? The only one I ever seem to read about is BlackRock Gold and General. Why is that? Are there so few similar funds for the retail investor?

(NB: I'm not looking to track the price of gold here. I have gold for that!)

Thanks.

heirloom

The HUI is the major miners ETF kind of thing, I think, though I don't know what it stands for but it's the ticker symbol for gold miners index I'm fairly sure of that. Maybe you can buy shares is it, or something.

sabretoothtigger

There is bound to be a tracker for that but I imagine its american. That doesnt mean much just thats where it trades

The prices do seem very cheap just by any measure.

The price of oil went up so I guess these miners do have higher costs. Im sure they must still be making more money now then previously, the HUI is all about the really massive companies

gadgetmind

sabretoothtigger wrote: »

The prices do seem very cheap just by any measure. The price of gold went from $850 in 2009 to $1600 in 2012 and yet you can buy miners at the same price almost ?

The miners are clearly benefiting from the higher gold prices but don't seem to be passing said benefits onto their share holders.

Mark Twain said that, "A mine is a hole in the ground with a fool at the bottom and a crook at the top."

sabretoothtigger

Some have increased dividends. I heard a couple put in direct links from the gold price to amounts paid to investors, maybe Fres did this as it would explain their yield

Reaper

saveonarola wrote: »

The only one I ever seem to read about is BlackRock Gold and General. Why is that? Are there so few similar funds for the retail investor?

Investec Global Gold does much the same thing. Last time I looked its charges were a fraction lower too.

Thrugelmir

gadgetmind wrote: »

The miners are clearly benefiting from the higher gold prices but don't seem to be passing said benefits onto their share holders.

Miners are exposed to political risks. Such as Resolute Mining's issues in Mali. So more to investing in this sector than just the gold price.

sabretoothtigger

Its the cheapest way you can buy gold reserves. The problem is paying for the fuel to refine it and yes the risks, from worker strikes and from all sorts


Centamin is 6 PE only but they dont pay any dividend and its more or less just one country, Egypt where today they are protesting once again.

Overall I do think they have settled down slightly, reminds me of Iraq a bit in that hundreds were dying during their election but they did pass eventually, GKP rose from 80p at that time.
Can CEY spike, its possible and far more then the actual gold price itself

Theres a dynamic called margin expansion that explains how stock prices can triple or more easily if the base product rises in price. The miners are a leveraged play, they dont just increase in line its a question of many multiples. In theory we talking absolutely massive share price movements I think, only oil price rise can stop this really

The profit is so massive theres a threat of government confiscation then. It happens with oil discoveries too, see HOIL

I know one miner who spends anything upto 1600 dollars to extract an ounce, they are on the verge of losing it all or so investors think (they'll fix costs I think).
Low cost miners are probably the safest and best valued at the moment but they all cheap

saveonarola

Thanks, everyone.

The HUI, as you say, appears to be all the big miners and fairly closely reflects moves in the price of gold, presumably because these big miners have fairly predictable output. I think I want the leveraged play that sabretoothtigger is talking about - just a smallish punt on something dramatic happening that could see the values of a few lucky juniors ncrease by a lot in a short space of time. I'll have to have a look at the BlackRock and Investec funds to see whether they have the exposure to juniors that I'm looking for.

grey_gym_sock

i haven't checked the numbers, but supposing it's correct that shares in gold miners are undervalued relative to the gold price, shouldn't you be going long in mining shares and short on gold? arbitrage.

saveonarola

grey_gym_sock wrote: »

i haven't checked the numbers, but supposing it's correct that shares in gold miners are undervalued relative to the gold price, shouldn't you be going long in mining shares and short on gold? arbitrage.

I'm no trader. My physical gold is not for speculation - it's insurance against the destruction of the currency - so I wouldn't sell it even if I thought the price was going to fall. Having said that, I think there's a chance that the gold price will go through the roof, and if that happens then some juniors could increase in value in a quite spectacular way. But I'm no trader, as I've said, and I'm fully aware that this is not much better than putting the money on a horse. All my other equity investments are in trackers!