Gold ETFs Bounce Back After Rough Month, But Is It Merely Speculation? [SPDR Gold Trust (ETF), Market Vectors Junior Gold Miners ETF, Direxion Shares Exchange Traded Fund Trust]

January 23, 2014 5:20pm NYSE:DUST NYSE:GDX

india-gold-etfThe price of gold, and pretty much any investment tied to it, has been fairing poorly for some time now. Companies involved with the mining and exploration of the precious metal have taken a dramatic hit over the last 12 months, including Golden Star Resources (NYSE:GSS).


The stock’s price dropped more than 150% in the last year, but then in one day this past week, January 21st, 2013, it jumped up over 25% upon closing. Perhaps more reflective of the true state of gold is the ETF market. To gain a better grasp, let’s look at some of the gold ETFs and how they have been performing over the past week. [Related: Gold: Patience Is Required Right Here]

The Market Vectors Gold Miners (NYSEARCA:GDX) ETF is a great example of how gold has rebounded this past week. The gold ETF is up almost 6% in the past week, ending January 21st, and over 14% in last month. Before that, it was down more 50% in the previous 12 months. It is also important to note that GDX also applies an indexing approach by investing in a stock portfolio congruent with the gold index. *

Another notable gold ETF is SPDR Gold Trust (NYSEARCA:GLD), which is a fund that aims to mirror the performance of gold bullion while considering the various expenses associated with maintaining the ETF. It is, in other words, a cost-effective method for buyers to invest in the gold market. While the fund has seen a bit of a drop off in the past couple days, over the last month GLD has performed better, riding an upswing of more than 3.5%, this is compared to a nearly 7.5% drop in the past three months, and nearly 27% in the last 12 months. [Related: Massive Shock Coming To The Gold Market]

For those bearish on gold, there is the Direxion Daily Gold Miners Bear 3X Shares (NYSEARCA:DUST) ETF, which looks to play short positions, placing a minimum of 80% of its net assets in investments likes contracts securities, indices and the futures market. This ETF, likely because it is of the bear variety, has somewhat of an opposite price trend compared to the aforementioned ETFs. For instance, DUST’s price is up around 79% in the past year, but down nearly 34% this last month, and 20% this past week. Conversely, a bullish fund is the Direxion Daily Gold Miners Bull 3X Shares (NYSEARCA:NUGT), which have shown an opposite trend compared to its bearish counterpart. [Related: Gold Miners: Trade Of The Year?]

Conclusion

There are many options in the gold ETF market, there are bullish and bearish options, there are funds that closely mimic the price of gold bullion, albeit offering a more cost-effective approach for investors; the question, however, is weather the upswing these ETFs have seen is an indication of a larger trend, or just speculation. While it’s hard to say for sure, it is difficult to imagine the price of gold sinking much lower than it has over the past year. For that reason, now might be the time to invest in the gold ETF market.

* On Janurary 22nd, GDX’s price fell back down 2.57% to $23.09.

** I hold long positions in both GSS and GDX.

By Jamison H., ETF Daily News


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