For much of gold’s gains earlier this year, miners have lagged. But that scenario has changed in earnest. Take a look at the VanEck Gold Miners ETF (GDX). That fund is higher by 24.55% for the 90 days ending June 3.
That ascent has propelled GDX to a year-to-date gain of 14.51%. That’s an advantage of nearly 350 basis points over the S&P 500. Gold miners are typically more volatile than other stocks. And critics often say that miners often overshoot spot gold prices in both directions. Those points are accurate. But they don’t diminish the fact that gold miners and ETFs such as GDX could reward long-term investors.
Obviously, gold is catching a bid from central bank buying and concerns that some major global economies are proving unsuccessful in their battles against inflation. Those are important near-term catalysts for bullion. But the long-term outlook for miners is increasingly bright. That’s due to some factors that arguably aren’t commanding enough attention.
Sustainability, Tech Could Boost Gold Miners ETF GDX Holdings
Mining can be an environmentally challenging endeavor. But more gold miners are leveraging technology to increase sustainability and be better climate and environmental stewards. Those efforts could pay long-term dividends in terms of reduced costs and improved efficiencies.
“Adoption of innovation in existing operations through digitalization and electrification initiatives is expected to drive cost and operational efficiency,” according to EY. “The rising number of low-grade gold deposits makes it essential for gold miners to explore economically and environmentally friendly methods of metal extraction. Sustainable production profile is likely to further position gold as a preferred investment asset among investors even more than its existing safe haven characteristics.”
There’s also evidence that precious metals miners, including some GDX member firms, are actively attempting to bolster ESG standards. That could broaden the potential audience of investors for gold miners — an asset class that’s often under-allocated to — while allaying long-running ESG concerns that have plagued the industry.
“As gold gains popularity as an investment asset, miners are increasingly expected to enhance their ESG reporting practices. To avoid errors in sustainability reporting, miners actively track and analyze high-quality ESG data, with strong governance and controls to ensure appropriate signoffs,” added EY.
The consulting firm also noted that among the next steps gold miners can take to improve sustainability are tapping green financing and making strides toward carbon neutrality.
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