The Dow Jones Precious Metals Index is a special stock market index tracking the stock prices of companies in the precious metals field, meaning those involved in mining gold, silver, platinum and other valuable metals. Like other stock market indexes, it is a weighted average of the companies included in the index, known as the index's components. You can use it to monitor how precious metals prices are doing in general, and you can invest in a precious metals index fund that roughly tracks the performance of the index.
Understanding Stock Market Indexes
Stock market indexes track the performances of groups of stock. Some indexes track big swaths of the market, such as the Dow Jones Industrial Average that tracks 30 blue chip stocks, the S&P 500 that tracks 500 major companies or the Nasdaq Composite that tracks stocks traded on the Nasdaq exchange. Those are commonly followed by investors and covered in business news to give people a sense of how the market is doing overall.
Others track particular sectors of the market, such as energy companies, real estate businesses or precious metals enterprises. They can be used by investors looking to get a sense of how a particular business sector is performing or to guide index funds that invest in those companies.
Dow Jones offers a number of such indexes, including the Dow Jones Global Shipping Index, the Dow Jones Internet Commerce Index and the Dow Jones Precious Metals Index.
Dow Jones Precious Metals Index
As the name suggests, the Dow Jones Precious Metals Index (abbreviated DJGSP) is made up of companies in the precious metals industry. Specifically, it includes companies involved in mining and exploration for precious metals including gold, silver and platinum with a minimum market capitalization, or total market value, of $250 million and a trading volume of at least $5 million per day.
Other indexes focusing on precious metals include the S&P Commodity Producers Gold Index which, as the name suggests, focuses on gold companies. The Dow Jones Basic Materials Index also has some overlap with the precious metals index.
Investing in Precious Metals
If you believe the price of precious metals like gold and silver are set to go up, there are several ways that you can turn that belief into an investment. One way is to actually buy the physical metals themselves, purchasing actual gold, silver or another material and keeping it yourself, but these can be a hassle to acquire, store and secure.
You can also invest in certificates that convey the rights to precious metals held in someone else's vault. Make sure you trust whoever you're doing business with if you choose to go this route so that you don't fall victim to a scam. You can also invest in funds that themselves invest in precious metals.
Alternatively, you can invest in the stock of one or more companies involved in the precious metals business. If you buy stock directly, you'll want to research the particular companies and know some of the details of their mining businesses as well as the market for precious metals in general. After all, even if the price of gold goes up, a particular gold mining company could still struggle if its mines fail to produce or are shut down due to labor issues, political turmoil or other problems.
Another option is to invest in a precious metals index fund that tracks an index like the Dow Jones Precious Metals Index. Since the fund will be invested in a variety of precious metals businesses, it will be less affected by any particular company's situation or even by the price of any one particular metal.
Steven Melendez is an independent journalist with a background in technology and business. He has written for a variety of business publications including Fast Company, the Wall Street Journal, Innovation Leader and Ad Age. He was awarded the Knight Foundation scholarship to Northwestern University's Medill School of Journalism.