Please read our complimentary research on what we believe could offer a potential 20% return this year, which is suitable for investors with a high risk tolerance. The price of gold bullion and gold mining shares has diverged to such an extent that we feel the gold miners are a ‘buy’ for the following reasons:
1) Gold miners are cheap trading at 20x earnings, a level not seen since the 2008 financial crisis.
2) Gold miners are oversold against the wider market, having fallen 11.75% since October compared with the S&P 500’s 28.56% rise.
3) Gold miners are low against the price of gold bullion.
4) Technically, the shares are at the lower end of a falling wedge, a bullish pattern.
We are recommending the purchase of the ETFX DAXglobal Gold Mining Fund, a low cost ETF that provides diversified exposure to the theme.