Gold miners were one of my top picks for 2020 and they will be again in 2021. Despite the fact that the largest gold miner ETF returned 23% last year, there's still a lot of value in this group. Cash flows have finally turned positive again and precious metals miners finally have the fundamental backing to stage a serious rally in 2021.
Silver provides maybe more value than gold right now. With the economic recovery showing signs of slowing and inflation risks rising, precious metals look primed to deliver another big year.
If you're looking to add precious metals exposure to your portfolio, I think gold and silver miners are the way to go. Since they're becoming cash flow generators, I think there's simply more upside here than in the physical metals. Gold and silver outperformed their miner counterparts last year, so there be more value in this trade than before.
Here are the top gold miner and silver miner ETFs for 2021.
VanEck Vectors Gold Miners ETF (GDX)
Easily the biggest ETF in the space, GDX focuses primarily on mid- and large-cap companies that focus on gold and silver mining. GDX market cap weights its components, but limits exposure to stocks where silver mining is a significant portion on their revenue streams.
VanEck Vectors Junior Gold Miners ETF (GDXJ)
GDXJ follows a similar methodology to GDX, but targets only the small-cap segment of the market. This fund consists of many smaller exploratory or early development phase companies.
Global X Silver Miners ETF (SIL)
SIL is the largest fund targeting silver miners. In order to qualify, a significant part of the company’s revenues generated must come from silver mining and/or closely related activities, such as exploration or refining. Qualifying components are market cap weighted.
ETFMG Prime Junior Silver Miners ETF (SILJ)
SILJ also uses a similar strategy to SIL (although it comes from a different issuer), but follows small-caps within this universe. SILJ is also market cap weighted and is generally comprised of 25–35 securities.
iShares MSCI Global Gold Miners ETF (RING)
RING is BlackRock's entry into the large-cap gold miner space. The fund targets a minimum of 30 companies in developed and emerging markets that are involved in the business of gold mining, primarily focused on the extraction and production of gold.
Sprott Gold Miners ETF (SGDM)
Sprott, the investment manager that specializes in precious metals products, offers SGDM as a way to target large-caps in this industry. The fund's index uses a rules-based methodology that is designed to emphasize gold companies with the highest revenue growth, free cash flow yield and the lowest long-term debt to equity.
iShares MSCI Global Silver Miners ETF (SLVP)
The sister fund to RING, SLVP targets companies, which are primarily engaged in the business of silver exploration or metals mining. SLVP makes its mark as being one of the cheapest funds in this space with an expense ratio of 0.39%.
Sprott Junior Gold Miners ETF (SGDJ)
Another entry to the junior gold miners space, Sprott also takes a factor-based approach to this fund by focusing on companies with the strongest revenue growth and the strongest stock price momentum.
U.S. Global GO Gold and Precious Metal Miners ETF (GOAU)
GOAU is one of the smaller funds in this group and provides investors access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means.
Global X Gold Explorers ETF (GOEX)
GOEX is Global X's peer to SIL and focuses on the broad gold miner industry. It has a large international presence with the United States accounting for less than 10% of the fund's total assets.