Why Gold Miners Are Seeing Outflows (Despite Outperforming)

Gold is one of those sectors that's really been on the outside looking in for the better part of 15 years. Now they're among the best performing sectors that we've seen. But despite that, we're still seeing about $4.5 billion in outflows in the largest gold mining ETFs. What's been the reaction when you talk to clients around gold miners and how are they viewing those as part of their portfolio?

The gold miners are really a hot topic right now. What's interesting about gold miners and what you just mentioned about the outflows is that many of the advisors and investors started buying the miners 2009, 2010, and the market peaked in 2011. So there's a core group of investors that are really just getting back to even or finally back in the money. And so they're realizing that and saying, "Hey, this was a long time to get back to even, I'm going to move on to something else."

Having said that though, with gold and silver doing so well and the miners doing so well with some of the best balance sheets out there, it's not just the returns. They have better dividend yields than the S&P 500. The return on invested capital is more attractive. They're less leveraged than many of the companies out there today.

And so there's a new wave of investors starting to pay attention to this. So I think we're getting kind of out with the old and old capital's coming out. They've broken even, but new capital is starting to show up and starting to participate in the space. So gold and silver again feel like it's kind of the early days as far as advisors looking at mining stocks as a unique way to add risk on to their portfolio.

And I think it's worth also mentioning that so often people think, well, if I'm going to invest in gold or I'm going to invest in silver, why not just do the miners because I can get torque to the trade? And I always like to say the physical market and the equity market are very different investments. The physical market is still more of a risk-off diversification investment and the miners are more of a risk-on opportunistic investment. And so that's how you really need to think about it.

And as we work with more and more advisors, we really help them go through that allocation and think about how much they should have in the physical market and does it make sense or is it appropriate for their clients to start looking at the minors as well. The answer is starting to be more and more yes, it is. And advisors are starting to look at minors.