Gold Stock ETF Bounce? (GDXJ, GLDX, GDX, GLD)
Christian Magoon: While gold prices have taken a nose dive, gold mining stocks have had a much steeper descent. Could this plunge actually be setting up gold stock ETF funds for a bounce? Here’s the gold stock ETF performance grid. Pay special attention to the Junior Gold Miners ETF (NYSEARCA:GDXJ).
This grid is full of ugly numbers but GDXJ’s and Global X Gold Explorer’s ETF (NYSEARCA:GLDX) losses over the last year of 48% and 55% respectively are massive. Now it appears that these losses are so big that some investors are starting to see bargains.
Forbes reported Tuesday that week over week, GDXJ saw an increase of $90 million worth of shares outstanding which is equal to 5% of the entire fund. This is a notable one week gain in ownership – especially during an 11% decline in GDXJ. This purchase could be a leading indicator that gold stocks are due for a bounce soon.
Besides investor interest, a quick look at the charts seems to indicate some upside for gold stocks relative to gold. Here’s the year to date performance chart of the two largest gold stock ETF funds, Market Vectors Gold Miners ETF (NYSEARCA:GDX) and GDXJ, versus the largest physical gold ETF (NYSEARCA:GLD). It seems like the disconnect between the two gold stock ETF funds and GLD has widened too much and may be due for a reversion to the mean.
Gold stock ETF products have been a tough investment over the last year. Now it appears that a bounce could be in store for these products due to their steep declines and current disconnect to gold prices. For those who are patient, this may be an opportunity to make money in gold this year, something that has been hard to do lately.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”