Gold Mining ETFs Gain Momentum as Investors Seek Safe Haven Amid Economic Uncertainty

Gold prices have surged nearly 50% this year, with the precious metal up 122% over the past five years, according to Steve Schoffstall, Director of ETF Product Management at Sprott Asset Management. This dramatic increase reflects growing investor concern about currency debasement, geopolitical instability, economic uncertainty and falling interest rates, with investors increasingly viewing gold as a safe haven asset.

Global investment funds have purchased approximately 13.5 billion ounces of gold, Schoffstall noted in an interview with Benzinga. Central bank purchases have also contributed significantly to record gold prices, with China purchasing gold each month for the past ten months. Countries increasingly view gold as a way to navigate around economic sanctions, according to the money manager.

Sprott Asset Management, which specializes in precious metals and critical materials, operates three gold-focused exchange-traded funds. The Sprott Gold Miners ETF (SGDM) manages approximately $124 million in assets and employs a passive index approach with additional screening for companies demonstrating strong revenue growth, favorable long-term debt to equity ratios and healthy free cash flow yield. These characteristics influence the weighting of companies within the fund.

The Sprott Junior Gold Miners ETF (SGDJ) focuses on development and exploration companies with market capitalizations between $200 million and $2 billion. This $291 million fund emphasizes junior gold producers exhibiting strong revenue growth and stock price momentum, with company weights partially determined by their price performance.

Schoffstall expressed particular enthusiasm for the Sprott Active Gold & Silver Miners ETF (GBUG), launched in February and already managing $100 million. This fund represents the only actively managed gold miner ETF currently available, leveraging Sprott's management team's collective century of experience in the gold mining sector. The investment team conducts over 200 meetings annually, travels to more than 40 countries and visits approximately 30 individual mining sites, enabling comprehensive understanding of company operations and direct engagement with organizational employees.

Despite gold's strong performance, investor caution toward mining companies persists due to what Schoffstall described as a hangover effect from the previous bull market. During the last gold rally, miners spent cash recklessly, leaving them vulnerable when markets declined. Current mining companies demonstrate greater intentionality in project development and financial stability, with investors rewarding this discipline through stock performance that has outpaced physical gold.

This year has seen approximately $4.3 billion in outflows from gold mining ETFs, creating what Schoffstall characterizes as an uncrowded trading opportunity. The divergence between strong gold mining stock performance and ETF outflows suggests additional growth potential for the gold mining market as investors gradually recognize the sector's improved fundamentals and disciplined approach to capital management.