Behind The Surge In Gold Mining ETFs

The fund tracks the Amex Gold Miners Index with a large cap focus, holding 37 companies in its basket in total. Canadian firms account for roughly 60% of the assets, followed by the U.S. and South Africa to round out the top three.

The product has some concentration issues though, as it allocates nearly 30% of its assets to the three biggest holdings. These include two Canada based firms – Goldcorp (GG), Barrick Gold (ABX) – and one U.S. company – Newmont Mining (NEM).

This is the most stable of the three on the list, but it still did quite well on the week, adding 7.9% in the time frame.

Market Vectors Junior Gold Miners ETF (GDXJ)

This ETF is also relatively popular, with AUM of $1.45 billion and average daily volume of just over one million shares a day. It follows the Market Vectors Global Junior Gold Miners Index, and is roughly evenly split between small and micro cap securities, holding about 68 securities in its portfolio.

Once again, Canadian firms take the lion’s share, though Australia (20.5%) and the U.S. (9.1%), round out the top three. This ETF is also much more spread out than its counterpart, allocating no more than 4.8% to any single security (read Gold Mining ETF Investing 101).

GDXJ was actually the best performer for the week, as it gained 12.3% as investors embraced the bullish trend in the gold mining ETF space.

Bottom Line

The three products above have all been beaten down in the YTD time frame. However, they have had trouble falling lower than their current level, suggesting there might finally be a bottom here.

This could be especially true when investors consider that the Fed appears unlikely to start a QE taper in the near term. And with the likely prospect of Janet Yellen as the next Fed Chair, a taper could take quite some time, suggesting there is at least some hope for this short term run to continue in gold mining ETFs.

This article is brought to you courtesy of Eric Dutram.

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