Behind The Surge In Gold Mining ETFs

gold silver metalsAfter losing as much as 50% of their value in the first half of 2013, gold miners have seen some respite in recent weeks on rising gold prices. Gold has rallied from just about $1,250/oz. to its current level above $1,350/oz., suggesting strong sentiment in the space.

This increase is also being felt in the ETF space with key products like (GLD), (IAU) and SGOL adding as well in recent sessions. While these performances have been good, events have been even better in the gold mining ETF space.

Usually, gold miners trade as a leveraged play on underlying precious metals. This means that when gold prices are rising, gold miners see even bigger gains, as they tend to experience more gains than their bullion cousins. As such, the gold miner ETFs outpaced the ultra-popular GLD and broad market funds like SPY by wide margins over the past few trading sessions.

Behind The Surge

Gold mining funds have been gathering steam as more sluggish economic data has come in. Data points such as weak consumer confidence, uncertainty on the manufacturing front, and a low level of job creation have all hit the market in the past week.

This news has suggested to many investors that the Fed will not be able to engage in tapering of QE any time soon. And if that is the case it is undoubtedly good for both gold (and other hard assets) and stocks.

Plus, since gold miners combine the both equities and precious metal exposure, they stand to be some of the best beneficiaries from this situation (read: 5 ETFs Surging on Bernanke’s Dovish Comments).

As such, the mining stocks are attractively valued at current levels, compelling investors to trend back into this space, building positions in the unloved stocks.

Gold Mining ETF in Focus

In this backdrop, we have highlighted three of the most popular choices in the space, any of which could be interesting picks for investors seeking to get in on the sector’s sudden upswing:

Global X Gold Explorers ETF (GLDX)

This is by far one of the most speculative plays in the mining space and tracks the Solactive Global Gold Explorers index. The ETF is widely spread across 20 small cap securities with none of them holding more than 9% of assets.

In terms of country exposure, Canada takes the top spot with 87% share, followed by Australia, the U.S., and the UK. The ETF has managed assets worth $31 million so far this year while volume is light. The fund charges 65 bps in fees a year from investors.

The product is up 11.3% in the past week, a pretty solid figure considering GLD added 2.8% in the same time frame (read: 5 Worst Performing ETFs So Far in 2013).

Market Vectors Gold Mining ETF (GDX)

This is the most popular gold miner ETF on the market, with close to $7.8 billion under management. Volume is also quite good, coming in at more than 34 million shares a day suggesting that it is a pretty heavily traded product.

Pages: 1 2

Leave a Reply

Your email address will not be published. Required fields are marked *