Are junior gold miners the best precious metals company right now?

Gold prices reached a new all-time high (ATH) of $2,749 per ounce on October 23rd, after reaching $2,710 on October 18th.

In fact, the precious metal is on track to deliver its best annual returns since 1979.

Macro factors have been quite favorable for gold over the past two years – rising geopolitical tensions and inflation have proven to be tailwinds for the metal’s role as a store of value – while outsized returns have renewed interest in the safe-haven asset as an investment. The raw material is currently expected to reach a price of at least $3,000 per ounce.

This has also left its mark on gold miners – the VanEck Vectors Gold Miners ETF (NYSE: GDX) and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) have both outperformed the spot price of gold. The first fund is up 40.59% year-to-date (YTD), while the second is up 43.31%.

All in all, this is a fairly similar level of performance – but we may see a divergence in the future.

Is the GDXJ about to soar?

According to Crescat Capital researcher Otavio Costa, the GDXJ has started to outperform the broader stock market – particularly the S&P 500 – from mid-2024. Additionally, the performance ratio has broken through a support line that has existed since 2011 – suggesting that this may be the start of a significant shift could.

The same cannot be said for GDX. To explain, we need to backtrack: While GDX as a fund contains mature, stable gold stocks, GDXJ focuses on junior mining companies – smaller companies that are primarily involved in exploration or new mine development but have higher growth potential.

GDX is certainly poised to reflect the shiny metal’s rise – but GDXJ appears to have attracted more investor attention, which could drive up the fund’s price. Costa’s research is timely – because it is a current event, readers still have the opportunity to take long positions at reasonable prices in the class of gold stocks that could have the best performance in the future.

Gold prices hit record highs due to rising demand

The precious metal has hit new all-time highs, buoyed by geopolitical instability, central bank accumulation and outsized yields that are attracting investors.

Still, investors should exercise caution – although the returns are enticing and many influential experts like Robert Kiyosaki are urging their followers to invest in precious metals, the fact remains that a decline is very possible – as the asset is at its most overbought level in 2017 has reached 5 years.

However, the bull case is compelling – GDXJ valuation has not reached excessive levels, and insights from the World Gold Council suggest demand is rising steadily at 3% year-on-year (YoY) – representing a good environment for companies to be ready to provide additional offerings.