The dollar weakening, global economies slowing, inflation about to rear its ugly head again … no wonder gold is making a big comeback. From South Africa to South America, stocks of gold miners and producers are flying high. Year to date returns range from the mere mortal highs to the stratosphere.
How long will this last, and even though the returns are dramatic, is there room for growth? Both these questions can be answered this way. I believe we are at the beginning of a bull market in commodities, which could go on for a few years and with gold trading at about 1,266 an ounce, it’s well below its record high reached in 2011 of 1,837 per ounce. The trend is definitely higher.
Chile’s GDP grew at 2% in the first quarter of 2016 up from 1.3% in the previous quarter, which was higher than excepted but well below the heydays of the past. However, if I am right about an upcoming bull market in commodities, then this might be the right time to invest in that economy.
For those who like playing it safely, the Chile focused ETF iShares MSCI Chile Capped ETF (ECH) has a nice year to date return of about 15%, or there is the VanEck Gold Miners ETF (GDX), which is up a whopping 92% year to date. For those of you like me, who are a little bit more daring with a good supply of antacids, I would suggest some gold mining and production stocks.
The first one I’d like to bring to your attention is Gold Corp (GG) which has a return since January 1 of 60%. The second is involved in mining, and not just particularly gold, and that is Sociedad Quimica y Minera de Chile SA (SQM), which is up 30% year to date.
Now for a couple more so keep those Zantacs handy and they are: Exeter Resource Corp (XRA), up a staggering 171% year to date; Atacama Pacific Gold (ATM), up 151% year to date; and finally if you’re still not out of Zantac, then how about Kinross Gold Corp (KGC) up 190% this year.
Now you will now doubt notice that I have not included the old war horse Barrick Gold (ABX) because everyone invests in Barrick Gold, so these others may be good alternatives. Finally, if all else fails, break out a bottle of Errazuriz Vinedo Chadwick Cabernet Sauvignon at only $160 a bottle and drink yourself silly. Cheers!
Peter Kohli is the CEO of emerging market specialist DMS Funds.