Gold is a safe haven investment for a number of reasons: it carries no counterparty risk, its supply is limited, it fits in small places, exists outside of the mainstream financial system and is universally seen as a store of value. Similarly, gold companies hold vast resources of gold locked in the ground that only they have the technology and skills to extract and bring to market. While gold and gold stocks are highly tradeable, volumes are dwarfed by stock, bond, and currency markets. A relatively small shift in global asset allocations can drive the gold markets. We believe such a secular shift has begun, driven by four broad categories of systemic risk: deflation, debt, inflation and loss of confidence.

MVIS Global Junior Gold Miners Index vs. NYSE Arca Gold Miners Index vs. Gold Price 

Source: MV Index Solutions, Bloomberg, Data as of 04/30/2020

About the Author:

Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Financial Times, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.