Precious metals equity

Precious metals equity is a term used to define a company that is involved in the exploration or production of a precious metal. Common precious metals include gold, silver, platinum, iridium, rhodium, and palladium. Some investors prefer using gold mining stocks as a substitute for gold bullion in an investment performance, and use a mutual fund or exchange traded fund that invests in gold mining stocks.

Precious metals equity and Gold stock indexes
Commonly sited indexes of gold stocks include the NYSE Arca Gold BUGS Index, the Philadelphia Gold and Silver Index, and the NYSE Arca Gold Miners Index.


 * NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The HUI Index was developed with a base value of 200.00 as of March 15, 1996.
 * Philadelphia Gold and Silver Index (XUA) is a capitalization-weighted index composed of 16 companies involved in the gold and silver mining industry. XAU was set to an initial value of 100 in January 1979.
 * NYSE Arca Gold Miners Index (GDM) is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The Index divisor was initially determined to yield a benchmark value of 500.00 at the close of trading on December 20, 2002.

In addition, S&P and MSCI provide indexes of gold and silver mining stocks. Dow Jones provides a Precious Metals Index

The table below provides index return data for the indexes tracked by exchange traded index funds.

Mutual funds
The U.S. mutual fund universe contains a sizable number of gold and precious metals funds, all of which are actively managed funds, and many which are broker-distributed load funds. Morningstar tracks performance of these funds. Active funds add to the risks inherent in investing in precious metals funds by introducing manager risk, the chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.

Exchange traded funds
In the U.S. indexed portfolios containing gold and silver mining companies are offered by Van Eck Global (fund inception 05/16/06) and Blackrock iShares (fund inception 01/31/2012).

Articles

 * Rediscovering Gold As An Asset Class Juan Carlos Artigas, Journal of Indexing, November/December 2010.
 * The Expected Return of Precious Metals Equity, by William J. Bernstein