Metals Heating Up
by Jessica Ferringer, ETF.com
Excerpts taken from artcle:
“One interesting distinction when considering investing in metals is investing in the spot price of the metal or investing in companies that mine the metal. Performance of spot versus miners can differ from one another, making understanding what’s in your metals ETF all the more important. “
Christian Magoon, CEO of Amplify ETFs, explained the differing return profiles of gold versus gold miners as follows:
“Gold mining stocks are a leveraged play on gold—both as gold price rises and falls. Gold mining companies have a cost, or breakeven, to mine gold. When gold prices are below that price, these stocks lose money, but oppositely, as gold prices rise above that breakeven price, the difference above that cost is entirely profit,” he said. “While gold prices could be up 10% in a given time, for example, a gold mining company could see the profitability exponentially rise due to that same percentage price gain in gold.”
Learn more: Amplify Pure Junior Gold Miners ETF (JGLD)
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