Looking for information on gold mining ETFs? The extractive (or mining) industry is that part of the primary sector that mainly deals with the extraction and subsequently the processing of mineral raw materials, i.e. those found in a deposit and which are precisely extracted to then be processed and transformed.
The minerals that are extracted are many: we can think of iron, copper, lead, tin, and zinc, to precious metals such as silver, gold, and diamonds.
When we pay attention to an investment, the first minerals that come to mind are the so-called precious metals, especially gold.
If you decide to invest in the extractive sector, you will mostly come across large companies, often multinationals, which have a large amount of capital available to build these companies and above all to bear the huge fixed costs necessary for extraction. It could also happen that you come across some small companies that have just started production; in this case, you will have greater risks given by the instability of a young company, but at the same time a greater possibility of growth.
Overall the gold mining industry includes exploratory drilling, geological assessment, financing, development, extraction, initial refining, and delivery of the gold ore.
Thinking of the mining sector we can associate the image of a classic mine from which mineral raw materials are extracted, ready to be processed, and transformed into finished products (yes, even into jewels).
However, we must also mention the problems that similar companies bring to the environment: first of all the exploitation of water, its pollution, the relationships that are created with the local communities that inhabit areas rich in minerals, and in general the non-sustainability which they cause to the environment.
This happens because these companies still stick to the methods used more than 50 years ago, and continue to generate waste and above all pollute the groundwater.
The advantage that derives from investing in gold by purchasing shares is certainly the fact that in this way you get dividends, while if you buy a gold bar, you don’t do anything with it unless you do not know how to melt gold, and like a good jeweler, you transform it into a ring to give as a gift!
What strongly characterizes gold ETFs is the price of the raw material, in fact, fluctuations in the price of gold also cause fluctuations in the prices of gold companies, so this is a situation that must be kept in mind.
The costs of gold mining are fixed, but profits vary, so when the price of gold goes up the mining company will have higher profits, while if the price of gold goes down, profits will also go down.
Modern mining companies are trying to follow environmental standards to improve the situation for the planet, and above all to reduce the concentrations of chemical and harmful elements in the water and air.
At this point, you may be wondering if it is worth investing in this sector. As we have seen, this is a consolidated sector, where the most important players are often large, solid, and profitable companies.
The downside is linked to the fluctuations that often occur in the price of gold, as happens to all raw materials: even, in that case, the main stumbling block is represented by their price.
The ETFs presented all three have a very high-risk profile, equal to 7, so this makes it clear that investing in the sector could promise good results, however, in the face of having to run some risk. Volatility also gives us an indication in this sense, since it is precisely linked to the trend in the price of gold.
If you are looking for a long-term investment (consider at least 5 years) and are not easily sensitive to risk, then go! If, on the other hand, you are looking for a more peaceful investment, perhaps this sector is not too much for you.
The only thing to always keep in mind is diversification: so I repeat, if you want to risks to bring home high returns then you can also include ETFs on the gold mining sector in your portfolio.
