Bernanke and the rest of the FOMC met for the final time of
2012 on Wednesday, once again moving markets with their outlook
and interventions. This time, Bernanke again offered up new
easing measures, matching many economists' expectations for more
bond buying to close out the year.
In this latest meeting, Bernanke announced a new plan to buy
$45 billion a month in long-term Treasury
in order to replace Operation Twist. This will be in addition to
the roughly $40 billion a month that the bank is already putting
into MBS, meaning that the Fed's commitment to bond buying will
fast be approaching one hundred billion a month (read
Play 4 Megatrends with These ETFs
The move also means that the Fed's balance sheet will have
nearly $4 trillion in bonds by this time next year, vastly
increasing the central bank's investment portfolio up from its
current level around three trillion. Beyond this, the
biggest development was that the Fed set a target unemployment
rate for the first time in its history.
Although joblessness has come down in recent months-partially
due to people leaving the workforce-it is still unacceptably high
to most, and Bernanke appears to be no exception to this rule.
The FOMC as a result declared that it will keep short-term rates
near zero until the unemployment rate hits 6.5%, a full 120 basis
points less than the current official rate of unemployment for
While this move to set up targets was welcomed news for those
who believe that Bernanke isn't doing enough to fight
unemployment with monetary tools, it also suggested that low
rates could be here to stay for even longer, and came as somewhat
of a surprise to at least a few market participants.
Stocks initially rose on the Federal Reserve news, but most of
the big benchmarks finished the day at breakeven and gave up most
of their Fed-induced gains. However, one segment did manage to
finish strongly in the green despite the late session slide, the
precious metal mining segment (see
Precious Metal ETFs 101
This corner of the equity world clearly benefited from the
market assumption of low rates for the foreseeable future and the
added inflationary expectations that could be coming down the
pike in the years ahead.
With this backdrop, we have highlighted a few of the biggest
precious metal mining ETF winners on this Fed meeting for
investors looking for some of the few short term beneficiaries of
the Fed's reflationary policies:
Market Vectors Gold Miners ETF (
Easily the most popular gold mining ETF on the market, GDX
focuses in on large cap stocks for its exposure. The ETF added
about 2.9% in regular hours-although it slid after hours-while
the volume came in slightly above normal, hitting 15.6 million
Three Biggest Mistakes of ETF Investing
This bump marks a continued mini run for the ETF, as the
product had slid significantly since mid September, before
finally catching a bottom in early December. Now with more easing
measures in the economy, some might be worrying more about the
specter of inflation, focusing more assets on this leveraged play
Market Vectors Junior Gold Miners ETF (
This ETF, which targets small and mid cap mining companies in
the broad gold mining space, was up about 1.9% on high volume.
The fund saw a roughly 20% boost in volume during the session,
pushing the product to nearly four million shares moving hands on
the day (read
Time to Buy Junior Gold Mining ETFs?
Investors should also note that the product has most of its
securities denominated in other currencies with just 14% of
assets going to U.S. dollar stocks. Canada and Australia
dominate, so any dollar moves against these currencies in light
of QE4 will also impact GDXJ going forward.
Global X Silver Miners ETF (
The most popular ETF that zeroes in on silver miners is Global
X's SIL, a product that added about 2.4% on the session.
Interestingly though, volume was a bit below normal on the day,
although traders did see a spike in interest right around 12:30PM
Eastern Time when the Fed released its policy decision (read
Are Silver ETFs Back on Track?
It is also worth pointing out that silver bullion did much
better than gold bullion on the day, suggesting that a reflation
trade could be focused in on silver for the time being. This
makes some sense as not only is silver a hedge, but the product
has a wide range of industrial uses so it could benefit no matter
what the outcome of Bernanke's policies are.
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MKT VEC-GOLD MI (GDX): ETF Research Reports
MKT VEC-JR GOLD (GDXJ): ETF Research Reports
GLBL-X SILVER (SIL): ETF Research Reports
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