After 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
This increase is also being felt in the ETF space with key products
adding as well in recent sessions. While these performances have
been good, events have been even better in the gold mining ETF
Is the Gold Mining ETF Slump Over?
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
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)
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 (
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 (
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.
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 (
), Barrick Gold (
) - and one U.S. company - Newmont Mining (
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 (
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
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.
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MKT VEC-GOLD MI (GDX): ETF Research Reports
MKT VEC-JR GOLD (GDXJ): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
GLBL-X GOLD EXP (GLDX): ETF Research Reports
ISHARS-GOLD TR (IAU): ETF Research Reports
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