Q: I recall asking here why materials stocks, namely gold, were so low. Now with gold prices rocketing I am amusing myself with the opposite worry. I am holding this etf and see that it has had a meteoric rise. Do you think that this is a still a prudent investment or is there a better way to manage my materials exposure? Is gold unnecessarily high right now?
5i Research Answer:
XMA is a solid, diversified, metals ETF. It does own more than just gold stocks, but gold is its largest exposure. For the sector, we would see it as one of the better ways to participate. The sector is always volatile, so an ETF at least provides good diversity. We do not think the party is over. Gold reacts to interest rates and the US dollar, and moves in both should be positive for the sector. Momentum is good and central bank buying continues. Gold's role as 'insurance' is likely to continue.