Gold Miners ETF vs. Junior Gold Miners ETF 2012 In Review

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December 12, 2012 4:57pm NYSE:GDX NYSE:GDXJ

Jared Cummans: Gold mining equities have become increasingly popular in the past few years as the precious metal has watched its price soar. Some even prefer their gold exposure through a firm with earnings, dividends, and more as opposed to owning a commodity

and hoping for its price to increase. Two of the most popular options out there are the Market Vectors TR Gold Miners Fund (NYSEARCA:GDX) and the Market Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ).


GDX is a product focused on large cap miners around the world. The fund has nearly $9 billion in assets, trades about 14 million shares each day, and charges 53 basis points for investment. As far as holdings are concerned, the fund is a bit shallow with only 32 securities in its portfolio and nearly 70% of total assets dedicated to the top ten. GDX has been around since 2006 and has a current beta of 2.38, while maintaining a dividend yield of 0.53%.

GDXJ, as its name suggests, focuses on small cap miners, which some consider to be a more pure play on the industry. The ETF has $2.7 billion in assets, trades 2.5 million shares a day, and charges 0.56% for investment. This fund outdoes its competitor when it comes to diversity, as it maintains a basket of over 80 holdings with less than 30% of total assets dedicated to the top ten securities. GDXJ debuted in 2009 and currently has a beta of just 2.24, a surprising result given that small cap investing typically has a higher beta than a large cap counterpart. Finally, GDXJ maintains a healthy payout of 5.76% per year.

Who Won This Year?

Let’s start with what most people are concerned with: performance. In 2012, GDX lost about 9.5% while GDXJ sank about 13.8%. Note that GDX costs three basis points less, which will help with overall returns. But, GDXJ’s dividend yield brings total losses from 13.8% to about 8%, while GDX’s paltry payout moves the needle to losses of 8.9%.

GDXJ takes the cake as far as net losses and gains are concerned, but GDX won the battle for assets. The large cap miner hauled in just below $1.4 billion in total assets, while GDXJ gained $1.2 billion by comparison. As a percentage of total assets, GDX’s AUM jumped 15.6% this year while GDXJ went up by 44.4%, as the gains for the small cap fund were much more significant compared to where it was at just one year ago [see also Gold’s 12 Year Run May Finally Be Over].

All in all, it has been a volatile year for gold miners, but the healthy inflows of these two funds suggests that there is still ample investor interest. If you are looking to add gold mining exposure to your portfolio, these are certainly two of the best options in the space. Note that while GDXJ has a lower beta for the time being, that is not a typical result, and will usually be a weaker choice for the more risk-averse investor. But if you are looking for steady income, the dividend yield of the small cap product may make it the perfect choice for long-term play. If you are looking to trade, GDX wins the liquidity battle hands down and should be your go-to product.

Written By Jared Cummans From CommodityHQ 

CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.

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