To The Moon

Summary

• Gold and gold-mining stocks have surged, driven by a weaker USD and central bank buying, with RING outperforming other gold ETFs.
• RING offers diversified global exposure to gold mining companies, trades at a low valuation, and has strong price action, earning a buy rating.
• Despite seasonal weakness, RING has bucked trends, showing bullish indicators and positive momentum, with a concentrated portfolio in top gold miners.
• Technical analysis shows RING at key resistance with a rising 200-day moving average, suggesting a higher broad trend despite potential near-term pullbacks.

jmoor17

Gold has had quite the last 12 months. An ounce of the precious metal soared to new all-time highs earlier this year amid rising US government debt and major central bank buying activity. The latest thrust has come about perhaps due to a different macro reason.

The US Dollar Index (DXY) has dropped to fresh lows going back to July 2023. Now, for a couple of years - going back to when Putin invaded Ukraine - gold and the dollar actually moved in tandem. The correlation appears to have flipped, given a protracted selloff in the greenback. A weaker USD has lifted some dollar-denominated hard assets, namely gold.

And shares of gold-mining companies have done even better than the commodity. I've analyzed a handful of the top 10 companies in the iShares MSCI Global Gold Miners ETF (NASDAQ:RING) in the last few months, and with strong price action in both gold and RING, there are reasons to like the group from a long-term perspective. I have a buy rating on the fund.

Over the past year, RING has outperformed the more well-known VanEck Vectors Gold Miners ETF (GDX). I was neutral on GDX back in Q2, noting seasonal weakness, but the fund retreated down to support I noted in May, which is encouraging.

RING +49% YoY, Outpacing GLD Gold ETF By Nearly 20ppt, Weaker USD Lately

Stockcharts.com

Central Banks Hoarding Gold

Apollo Global

According to the issuer, RING seeks to track the investment results of an index composed of global equities of companies primarily engaged in the business of gold mining. The ETF offers investors exposure to companies that derive the majority of their revenues from gold mining and gives targeted access to global gold mining stocks. RING can be used to diversify a portfolio and to express a global sector view.

RING is a small ETF with just $600 million in assets under management as of August 23, 2024. The fund pays a small 1.43% forward dividend yield, about on par with the payout of the S&P 500 while RING's annual expense ratio is low to moderate at 0.39%. With an A+ share-price momentum ETF Grade by Seeking Alpha's quantitative model system, RING is the No. 1-rated ETF in its asset class.

Risk metrics are not so sanguine, however, primarily because of its high concentration and often volatile price action, featuring a high beta to spot gold price trends. RING is not very liquid given its modest size - average daily volume is 155,000 shares and its 30-day median bid/ask spread is wide at 26 basis points, so I encourage investors to use limit orders during the trading day.

Digging into the portfolio, the 4-star, Gold-rated ETF by Morningstar has a mixed allocation across the style box. Nearly one-third of RING is invested in large-cap growth stocks, while more than a quarter of the portfolio is housed in mid-cap value. So, there's ample diversification from this perspective. What I also like is that RING trades at just 14.8 times earnings. GDX, by contrast, sells at 16.4 times earnings. But with either fund, prices can quickly fall when gold drops.

RING: Portfolio & Factor Profiles

Morningstar

All of RING's equity holdings are found in the Materials sector - a space that notched fresh all-time highs to kick off the final full week of August. What's a potential risk for RING is that there's a high 75% of the fund's total assets in its top 10 positions.

Thus, keeping tabs on firms like Newmont (NEM), Agnico Eagle Mines (AEM), and Barrick Gold (GOLD) is key. I've included a look-ahead of the corporate event calendar to help prospective investors gauge risk ahead.

RING: Holdings & Dividend Information

Seeking Alpha

A Busy Slate of Gold-Miner Corporate Events

Wall Street Horizon

Seasonally, I mentioned that now is a tough period of the year, historically speaking. Indeed, August and September are RING's worst months over the past 10 years.

So far, though, the fund has bucked the usual calendar weakness, which is a bullish indicator. But with the last four Septembers featuring negative total returns, the bears may reassert themselves in the near term.

RING: Bearish Late-Q3 Trends

Seeking Alpha

The Technical Take

With a low valuation, positive momentum, and a concentrated portfolio, RING's technical chart is generally encouraging. Notice in the graph below that shares are now back to a key resistance point between $33 and $34. That's where the ETF topped out at in Q2 2021 and a year later. We could certainly see RING pare recent gains back down to the rising 50-day moving average, which comes into play near $30. But with a rising long-term 200-day moving average, the bulls control the primary trend.

Also take a look at what transpired just a handful of months ago. Shares broke out from a downtrend resistance line at the same time as a bullish golden cross pattern, boxed in orange below. I also like how RING's RSI momentum oscillator at the top of the chart has been ranging in a bullish area between 40 and 80, never coming close to technical oversold conditions - another sign of strength.

Overall, I would not be surprised to see some wrap-around of the $33 to $34 zone through the end of the third quarter, but the broad trend is higher.

RING: Shares Rally To Key Resistance, Rising 200dma

Stockcharts.com

The Bottom Line

I have a buy rating on RING. I see this gold miner ETF as inexpensive on valuation and a decent intermediate-term chart with a busy corporate event calendar ahead.