Traders appear to be taking some profits in gold miners and
Wednesday and that is not surprising. The Market Vectors Gold
Miners ETF (NYSE:
) and its small-cap counterpart, the Market Vectors Junior Gold
Miners ETF (NYSE:
) are both down 3.2 percent. That might sound bad, but consider
that since the start of July GDX was up almost 14 percent heading
into Wednesday and GDXJ was up 19.6 percent.
Some profit-taking was due to occur at some point. While the
recent upside moves by various mining ETFs have been impressive,
the track record for these funds and their constituents over the
past 18 to 24 months
has been ominous at best
. That could mean some investors might need some more cajoling to
truly embrace mining stocks and ETFs.
Compelling valuations and the potential for a sustained rally
in gold and silver prices are fundamental factors that could bode
well for further upside for the miners. If that scenario comes to
may be also be worthy of consideration.
PureFunds ISE Junior Silver ETF (NYSE:
) When it comes to silver mining ETFs, the Global X Silver Miners
) is the dominant name, though that fund has a rival in the form
of the iShares MSCI Global Silver Miners ETF (NYSE:
). Over the past month, either SIL or SLVP made for a great
choice as the two are up an average of about 23 percent.
No one would quibble over returns like that, but the PureFunds
ISE Junior Silver ETF has surged 27 percent over that time. Think
of SILJ as the GDXJ of silver mining ETFs. Yes, there are some
small-caps in SIL and SLVP, but the newly minted SILJ "is the
first pure-play ETF to exclusively hold silver explorers and
junior silver producers,"
according to PureFunds
) and Fortuna Silver (NYSE:
), SILJ's two largest holdings, have an average market cap of
about $500 million. Those stocks combine for over 24 percent of
the ETF's weight.
IndexIQ Australia Small-Cap ETF (NYSE:
) Slowing economic growth in China, the looming end of the
Australian mining boom and, yes,
falling gold prices
have been among the reasons Australia ETFs have disappointed this
Now that gold prices are rebounding, so are Australia ETFs.
The iShares MSCI Australia ETF (NYSE:
) is up 5.4 percent in the past month, but the better of playing
Australia's status as one of the world's largest gold producers
is with the IndexIQ Australia Small-Cap ETF. KROO has proven as
much with a one-month gain of 12 percent.
KROO has 22.8 percent weight to the materials sector, which is
450 basis points higher than EWA's exposure to the same sector.
The small-cap fund also gives investors exposure to improvement
in Australian economic data as consumer discretionary names
account for over 26 percent of the fund's weight.
Global X Pure Gold Miners ETF (NYSE:
) The Global X Pure Gold Miners ETF,
a recent victim of a reverse split
, has fought back to surge 22 percent in the past month. That is
one of the best one-month run among mining ETFs, though hardly
anyone has noticed because of GGGG's size (just $3.6 million in
assets under management).
On the surface, GGGG appears to be a copycat of GDX and the
funds do share a few of the same holdings. However, GGGG is not
heavily allocated to mining giants such as Goldcorp (NYSE:
) and Barrick (NYSE:
) as GDX is. In fact, those stocks are not even found among
GGGG's 23 holdings.
The Global X offering has a heavy international bias as the
U.S. receives a weight of just under five percent, the same as
Kazakhstan. Canada, Australia and South Africa combine for about
70 percent of the ETF's country weight.
For more on ETFs, click
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