I comment next on Gold ETFs and positioning sizing on junior gold miners.
There are 4 Gold ETFs that I am familiar with and have been involved in.
* PMGOLD
* GOLD
The above two Gold ETFs are not currency hedged, in other words it moves in accordance to AUD Gold.
So these are good ETFs to have if you are looking to hedge against inflation, because a lower AUD is inflationary (cost of imports go up) and a lower AUD translate into bigger returns for these ETFs while gold itself is a natural hedge.
But as my poor returns to date in B&G portfolio has shown, when AUD rises (which it did since the March lows), the fund can underperform even when gold price is on the rise because of the sharp rise in the Aussie since then. The AUD is a risk-on asset, when positive momentum prevails for rising asset prices, it tends to be bid up and conversely when things arent so rosy, the AUD falls relative to the USD.
But these ETFs can enjoy a bigger return than QAU if we face a dollar liquidity shortage which sends the USD up and AUD down in relative terms while gold may also rise in tandem , hence a higher gold price in AUD terms.
* QAU
This is the pure currency hedged gold ETF, its movement tagged to USD.
You would want to own this if you are concerned about a rising AUD relative to the USD, as QAU will outperform the above (GOLD, PMGOLD) in such situations.
* GDX
This is the Gold ETF for gold miners (producers not juniors)- so it is a good exposure to major global gold miners and not just Australian ones and returns have been great.
There is also another MNRS which is also a Gold miner ETF but this one has low liquidity and best avoided.
Now on junior gold miners size positioning.
As mentioned in the early post, you wont need much capital to benefit sizeably from an eventual rise. Sizing in low thousands e.g even $1-$2k does not expose significant capital to risk but yet able to possibly make very sizeable gains that will help improve overall portfolio returns. But in the same token , one must be prepared to lose up to 70% of capital if the project does not work out or in such event that gold crash and burn, the probability of these happening is not high but one must still be prepared. Hence, they are still speculative and respect should be accorded accordingly to their speculative nature.
You can work out a hypothetical example of a portfolio A with 80% cash earning 1.5% and 20% junior gold stocks earning 4x rise in gold (80%) against another portfolio B with 60% in stocks earning 10% and 40% in gold ETF with 20% gain, portfolio A under those assumptions returns 17.2% while portfolio B returns 14%, and portfolio A is able to further leverage to use cash if and when general stocks crash to their lows again. And if portfolio B's non gold stocks (the 60%) falls by 20% ahead, its net return drops to -4% assuming the return on gold remains the same, while portfolio A continues to return 17.2%. And if the 20% junior gold stocks actually net a loss of 10% i.e you picked some lemons amongst your basket of juniors, you still end up just -0.8% with capital largely intact.
Of course you can simulate various scenarios but the example (which is not advice) is to demonstrate that junior gold miner stocks have incredible price leverage on gold even with minimal capital , if your objective is to generate a superior overall return rather than betting big on single junior gold wonder (which IMO is purely speculative gambling).
The thing is to best buy these juniors is during periods of weakness and before the $1800 break out euphoria happens , the earlier you are in, the less chance you would need to buy in when the euphoria happens. OF course, IF the euphoria happens but you got to believe in it happening in time , otherwise you shouldn't be trying. And this is why I say dont be fixated by price, do you believe that gold would go higher from here over time? Yes or NO? If No, then forget it and don't start jumping in when investors have already positioned well ahead waiting to sell to you. If Yes, the only reason you're not in is because you are waiting , when the price falls, you may not have the conviction because you are fixated on the price (and perhaps the charts) instead of the underlying reasons why gold would be higher over time. But hey, I could be 100% wrong here too and if so, it is a measured position relative to what I work out what I can afford to lose. And you may have to work that out yourself based on your own circumstance.
