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Why gold miner ETFs have lagged gold prices

Posted on 15 February 2013

Gold mining stocks and exchange traded funds have consistently lagged the run-up in gold prices. Although the two seem they would be in agreement tracking the price of gold, there are a number of reasons why they tend to diverge. “Gold miners do not perfectly track the price of the physical commodity. Most of these companies have significant operating leverage, which can magnify the effects of fluctuating gold prices on their profitability.
They also add a layer of political and operational risks that investors in the physical commodity do not face. For example, in recent years, several of the fund’s mining operators misallocated resources by running low-return mines that did not cover their cost of capital,” Alex Bryan wrote for Morningstar………………………………………..Full Article: Source


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