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Gold stocks regain glitter for fund investors

swon@globeandmail.com

What are we looking for?

How precious metals exchange-traded funds fared in August.

In what is usually a strong month for these commodities, the price of gold and silver rallied. Speculation about more money printing by central banks helped to spur interest in precious metals, which are regarded by many investors as a buffer against inflation.

The screen

We ranked the top 15 gainers among Canadian-listed ETFs. Inverse (short) ETFs and those making both long and short bets were removed from our screen. Leveraged ETFs, which can amplify long and short bets on the market, were also excluded.

What did we find?

A lot of glitter in gold equity and silver bullion ETFs.

BMO Junior Gold ETF, which tracks smaller-cap stocks, was the biggest gainer with a 13.2-per-cent return.The iShares S&P/TSX Global Gold ETF, the fourth best performer, rose 9.2 per cent. Both of these equity-focused ETFs outpaced the 5-per-cent increase for the price of gold. The spot price for the yellow metal rose to $1,692.01 (U.S.) per ounce.

The outperformance by stocks over bullion is a bit of surprise. Gold equities typically offer greater leverage than bullion to a rising gold price, but the opposite has occurred in the past couple of years. Equities have lagged surging metals prices, particularly because bullion ETFs have been attracting lots of investor interest, and margins of miners have been hurt by rising commodity prices.

"When gold stocks outperform bullion, it's a good sign that there is a building of confidence in the underlying commodity, particularly when the small caps outperform the seniors," said Alfred Lee, an investment strategist with BMO ETFs at BMO Global Asset Management.

Twenty six of the 34 stocks in the BMO ETF rose in price last month. Gainers included names such as Allied Nevada Gold, up 22 per cent; Alamos Gold, 14 per cent and Coeur d'Alene Mines, 35 per cent.

The price of silver jumped 13 per cent to close at $31.73 an ounce last month. Horizons Comex Silver ETF, which tracks futures contracts, rose 12.2 per cent. Horizons Silver Yield ETF, which is invested in the U.S.-listed iShares Silver Trust and uses a covered-call strategy on one third of the assets, rose 10.6 per cent.

*****

TOP-PERFORMING CANADIAN-LISTED PRECIOUS METAL ETFS IN AUGUST

Assetsto Aug. 31/12Calendar year returns
ETFSymbol(in $ mil.)MER1 monthYTD2011201020092008
BMO Junior GoldZJG-T99.20.6213.23%-12.67%-27.95%
Horizons COMEX SilverHUZ-T18.20.8512.22%10.60%-12.39%77.19%
Horizons Silver YieldHZY-T3.5N/A10.61%
iShares S&P/TSX Global GoldXGD-T1,259.70.559.20%-12.69%-14.08%26.01%7.04%1.01%
BMO Energy CommoditiesZCE-T3.20.769.15%3.57%
Horizons Enhanced Income Gold ProdHEP-T73.10.807.64%-7.50%
Horizons Crude Oil YieldHOY-T3.4N/A7.01%
Horizons Winter-Term NYMEX CrudeHUC-T5.90.976.76%-4.51%-1.16%4.83%
iShares S&P/TSX Cap MaterialsXMA-T202.60.556.75%-8.58%-21.61%35.77%33.48%-26.83%
iShares S&P/TSX Venture IndexXVX-T1.10.796.64%-10.30%
First Asset Can-Materials Cov'd CallMXF-T8.40.686.30%-9.47%
iShares S&P/TSX Cap Info TechXIT-T24.40.555.99%-6.05%-20.48%4.12%52.44%-49.14%
BMO Precious Met Commodities IdxZCP-T5.40.765.43%6.72%
PS QQQ (CAD Hedged)QQC-T10.90.325.13%21.93%
PS S&P 500 High Beta (CAD Hdg)UHB-T3.30.355.10%
S&P/TSX Total Return2.11%1.35%-8.71%17.61%35.06%-33.00%
Source: Lipper, Bloomberg

© 2007 The Globe and Mail. All rights reserved.

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