NEW YORK ( TheStreet) -- Gold mining shares and ETFs such as Market Vectors Gold Miners ( GDX) remain a good choice for investors, even as gold prices have trouble rallying.
Driven by widespread financial panic and a desire for stable investment opportunity, gold prices steeply ascended in May and June thanks to demand from American and East European markets. Yet very recently, gold futures dipped in response to stronger U.S housing reports, as well as a recent set of European bank stress tests that took place last week, showing signs that, as fears of economic meltdown gradually subside, the yellow metal's price acceleration may cool down. In another example, the most actively traded gold contract, specifically for December delivery, dropped by $4.60, or roughly .4%, settling at $1,187 an ounce on the Comex division of the NYSE. Furthermore, U.S Treasury prices dropped in response to government data that showed a rebound in homes sales last month. Overall, both trends suggest a recent increase in market confidence, which may, in fact, erode the high gold prices we have observed over the past few months. In short, as less concerned investors detach themselves from the refuge and financial comfort of gold holdings, the steep price spiking may simmer down relative to the past few frenetic weeks. This has also caused the miners to underperform in July, but that doesn't make them a bad investment. As I have mentioned in past articles, this fund and its junior miners sibling, Market Vectors Junior Miners ETF ( GDXJ), give investors the opportunity of ETF coverage on either established operations or more volatile explorers and small producers.
In terms of national diversification, Canadian companies lead the fund's holding percentages, representing a substantial 60.2% of the fund's total securities. Meanwhile the U.S., South Africa and Peru follow in terms of country-weighting, each accounting for 13.9%, 13.2% and 4.3% of the fund's total holdings, respectively. In terms of top holdings, GDX's largest players include Barrick Gold ( ABX)with 16.3%, Goldcorp ( GG) with 11. 9%, Newmont Mining ( NEM) with 10.8%, Anglogold Ashanti ( AU) with 5.9% and Kinross Gold ( KGC) with 4.8%. Over the past year, GDX gained 23.5% and it is up 6.5% thus far in 2010. That compares to a 14.7% gain and a 0.5% loss over the same period for SPY. Fidelity Select Gold ( FSAGX) offers similar exposure. In terms of country diversification, FSAGX is largely rooted in Canadian gold corporations, with 50.6% of the fund's assets designated to Canadian companies and 17.2% to American holdings. Other noteworthy nations include South Africa (11.2%), Australia (7.0%), and the United Kingdom (6.3%).