While major gold ETFs such as the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) have been lethargic to start 2013, leading some traders to ponder the fate of the yellow metal's 12-year winning streak, some analysts and investors still see upside ahead for gold.
Not surprisingly, part of the near-term bull case for gold centers around the Federal Reserve's plans to keep interest rates near zero through 2015.
"Given that the Federal Reserve is committed to keeping short-term interest rates at near zero through 2015, we see no opportunity cost for buying and holding gold anytime soon. Low short-term interest rates reduce the opportunity cost of holding gold as an investment," S&P Capital IQ said in a research note.
S&P Capital IQ does not have ratings on the marquee gold mining ETFs, such as the Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDX), but the research firm sees opportunities with what previously been a disappointing group among sector ETFs.
"Despite higher gold prices, global mine production has been stagnant for over a decade," said the research firm. "We believe production will remain stagnant for the next several years, as old mines are becoming depleted and are not being replaced to the extent needed to significantly lift output. Through the first three quarters of 2012, mine production fell 1.9%."
The research firm sees countries, such as China, with large dollar reserves looking to diversify away from the greenback and into larger gold holdings.
"Additionally, we think that gold will rise in all currencies due to the implementation of quantitative easing by central banks worldwide," S&P said.
S&P is bullish on some individual gold miners, including Barrick Gold (ABX) and Randgold Resources (GOLD), both of which garner four-star S&P ratings. S&P has a three-star rating on Newmont Mining (NEM). Barrick is GDX's largest holding with a weight of almost 12.1 percent. Newmont is that ETF's third-largest holding with an allocation of nearly eight percent.
Despite gold futures rising over the past year, the $8.7 billion GDX is off 15 percent in that time. The more volatile GDXJ has been even worse, tumbling 23.1 percent over the same time. However, some traders have noted an uptick in share creations for GDXJ in recent weeks, a potentially bullish sign.
Additionally, S&P notes that GDXJ could outperform GDX "in a rapidly rising gold price environment." GDXJ has $2.5 billion in assets and an annual expense ratio of 0.54 percent.
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