An ETF to Play the Gold Miners

NEW YORK (TheStreet) -- For investors expecting the gold miners to report strong first quarter earnings this week, now is the appropriate time to gain exposure to gold through the miners.

Newmont Mining(NEM) will report earnings Tuesday, while Goldcorp(GG) and Barrick(ABX) report on Wednesday. Combined, these companies account for 38% of the net assets of Market Vectors Gold Miners ETF(GDX).

Last earnings season, the reports from these top components of GDX were spread out over the course of almost a month, with a week or more separating each company's announcement. All three companies beat estimates, but the impact on GDX was minimized due to the timing of the reports. This time around, the effect of the reports on GDX will be more direct.

ETFs are an optimal tool for investors to catch a trend that will affect an entire sector. In earnings season, investors can try and maneuver around those occasions where a report from a single company or, more often, a group of companies, can identify a developing or emerging sector trend. In the case of gold, investors want to see the high demand for gold translate into profits.

During the financial crisis, it seemed as though almost every country was at risk of having problems, and gold was sought as a hedge against potential market disaster. The picture has brightened globally, but a shadow of financial doubt is still cast over Europe courtesy of Greece's budget problems and the rest of the continent's linkage to their mess via the euro. Gold has hit new all-time highs in euros in 2010, even though it is below 2009 highs in U.S. dollars.

In the background are inflation fears. Although they've yet to manifest, many investors are convinced that inflation will return in force and that gold will be a good way to hedge their risk. Also working in gold's favor are emerging markets such as India and China, where economic strength means consumers have rising incomes to support their gold demand.

Analysts expect that gold will increase in value in 2010, but the real gains in terms of an investment will be in shares of gold mining companies. In addition to seeing their earnings rise, these firms may see multiple expansion as the sector becomes more attractive. GDX is still below its 2008 peak as well, even though earnings and revenues have been moving higher in the industry.