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By: Joe Foster, Portfolio Manager
Jump in Rate Hike Expectations
The gold market moved to the beat of the Federal Reserve's rate hike signal in May. On May 18, the market interpreted the minutes from the Federal Open Market Committee's April meeting as more hawkish than anticipated. Gold traded down for nine consecutive sessions following the release of the minutes and ended the month at $1,215 per ounce for a loss of 6.0% or $77.66.
Early Stages of a New Bull Market
We believe this is another key inflection point for gold that suggests the early stages of a new bull market. It appears that gold is poised to remain above the technically and psychologically important $1,200 per ounce level and, while it is not uncommon for the gold price to struggle in the summer months, we believe gold is forming a new base. We expect to see higher gold prices as the year progresses.
Read the full May Blog Post: Setting the Stage for the Next Gold Bull Market »
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“Companies are still very much focused on efficiencies, operating improvements, and cost savings. But with higher gold prices, the conversation has switched back to how best to deploy new cash flow to enhance future growth and profitability.”
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Portfolio Manager and Strategist, Gold and Precious Metals
"Investors have a heightened sense of financial risk, and in this type of environment, they will look to gold as a safe haven. The U.S. dollar may be the first safe haven of choice, but when it looks shaky, investors turn to gold."
"You look around the world and you’re likely to find someplace where gold is probably being used as a safe haven"
"Mines are redesigned yearly if they need to be, and with the collapse of gold in 2013, we saw widespread revisions. Today, the industry is geared at a $1,100 gold price in terms of mining plans, with all-in sustaining costs for the mines at approximately $920 an ounce."
"I think eventually a rate increase will create financial risks and unintended consequences that will drive gold higher. Whether that happens in the near term or the long term is anyone's guess."
"If those deflationary concerns ever creep into the U.S. economy, I think you would see the dollar weaken and gold strengthen."
"Gold companies must create value in order to be successful, and there are several ways that a gold company does this. The most effective way is through discovery."
"[Companies] such as Barrick, Newmont, and AngloGold went through a period of conglomeration when large companies were merged together to create what we call "super-majors” and it's very hard to sustain the super major model."
Joe Foster and Ima Casanova
Gold Investment Team
"We invest across the spectrum, but in Burkina, it is mostly mid-tier and junior companies that are active. Most of Burkina’s gold deposits are moderate to smaller-sized, so we find smaller companies there. Because of the favorable operating environment, there are quite a few interesting opportunities."
Jan van Eck
"The Fed’s decision was a bit of surprise to us, because we had been looking at the U.S. labor market statistics. Unemployment has been falling, and we thought that this was good enough data for the Fed, which is very data driven..."
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As far back as 1500 BC, Egyptians and other ancient peoples used gold for currency, and its importance has not waned since. In today’s world, we may not carry gold coins in our pockets, but gold remains one of the most highly valued commodities for cultures across the globe.Sound CurrencyGold’s historic role as a sound currency alternative is recognized universally — from farmers in India whose high-carat jewelry is a form of savings, to investors in the West who accumulate coins and bars, to central bankers around the globe who hold gold in their foreign exchange reserves.Powerful Investment ToolToday, gold is recognized as a potentially powerful tool in an investment portfolio. Gold may:
Portfolio facts and statistics are shown for Class A shares only unless otherwise noted; other classes may have different characteristics
†NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase. No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distributions. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge. See the
prospectus and summary prospectus for more information.
1Expenses are calculated for the 12-month period ending 05/01/16: Class A: Gross 1.43% and Net 1.43%; Class C: Gross 2.22 and Net 2.20%; Class I: Gross 1.07% and Net 1.00%; and Class Y: Gross 1.21% and Net 1.10%. Expenses are capped contractually through 05/01/17 at 1.45% for Class A; 2.20% for Class C; 1.00% for Class I; and 1.10% for Class Y. Caps exclude certain expenses, such as interest.
2The NYSE Arca Gold Miners (GDMNTR) Index (the "Index") is a Net Total Return modified market capitalization weighted index comprised of publicly traded companies primarily involved in the mining of gold and silver in locations around the world. The U.S. Dollar Index (DXY) indicates the general international value of the U.S. dollar. The DXY does this by averaging the exchange rates between the U.S. dollar and six major world currencies. All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
The views and opinions expressed are those of VanEck. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The Fund’s overall portfolio may decline in value due to developments specific to the gold industry. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. The Fund is subject to risks associated with investments in debt securities, derivatives, commodity-linked instruments, illiquid securities, asset-backed securities, CMOs and small- or mid-cap companies. The Fund is also subject to inflation risk, short-sales risk, market risk, non-diversification risk, leverage risk, credit risk and counterparty risk. Please see the
prospectus and summary prospectus for information on these as well as other risk considerations.
Investing involves risk, including possible loss of principal. Please call 800.826.2333 or visit vaneck.com for a free prospectus and summary prospectus. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read the prospectus and summary prospectus carefully before investing.
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