Email of the day (3)
"Thanks for link to the very interesting report on gold posted on Friday.
"With regard to the authors' opinion that junior miners "are the best way to play a rising gold price" - now that the Market Vectors Junior Gold Miners ETF (GDXJ) has been trading for about a year and a half, have you formed any view on its suitability as a vehicle for this type of investment?
"Also, if, as the report puts it, the rationale for investing in the miners is to get leverage to a rising gold price, wouldn't it be simpler just to take leveraged position on gold directly? After all, this can be straightforwardly done by private investors, say, by means of a spread bet."
David Fuller's view I regard junior miners as a high-beta play on gold, but probably in need of a neutral to positive overall stock market environment to record that beta on the upside.
If that is the environment you expect, then GDXJ seems a suitable vehicle, being reasonably liquid at $2.5bn and offering a good spread across the sector.
If it is leverage that you want, then a tax-efficient spread-bet in bullion is a sensible route, provided you are accustomed to trading on that basis. I assume that you can also spread-bet on GDXJ, although the spread would be considerably higher than for bullion. With spread-betting, getting the trend right is less than half the battle. The really tricky part is always going to be tactics regarding stops, especially if you are building a sizeable position in a trending environment.