Federal Reserve Chairman Ben Bernanke didn't do gold bugs any
favors on Thursday when he refused to walk down Quantitative
Easing Boulevard a third time. While the central bank chief did
say the Fed stands ready to act, those comments cannot be taken
to mean QE3 is imminent and that proved to be problematic for
gold and gold miners.
Ah, yes. The gold miners,
home to so much good recently mining stocks and
ETFs crumbled in the wake of what Bernanke did not say
. Sure, it can be said the likes of the Market Vectors Gold
Miners ETF (NYSE:
GDX
) and the Market Vectors Junior Gold Miners (NYSE:
GDXJ
) were near-term overbought and due for a pullback, but
Thursday's action was quite nasty.
However, traders might want to take advantage this
distribution day to consider some backdoor approaches to gold
miners. Let the dust settle for a day and then have a look at an
ETF such as
the IndexIQ Canada Small-Cap ETF (NYSE:
CNDA
) or the unheralded Global X S&P/TSX Venture 30 Canada ETF
(NYSE:
TSXV
).
The Global X S&P/TSX Venture 30 Canada ETF, which is just
15 months old and charges an expense ratio of 0.75% per year,
isn't heavily traded, but the index employs a liquidity-driven
weighting scheme and each stock must trade on average, at least
100,000 shares-per-month during the 6 months preceding the
rebalance reference date, according to Standard & Poor's. So
while TSXV's average daily volume of just 1,900 shares per day
may seem off-putting, the fund's overall liquidity may prove to
be a pleasant surprise to some.
Not that this is an ETF for income investors, but TSXV has a
2.77% yield, a nice surprise as well, and that's better than what
S&P 500 and Dow Jones Industrial Average tracking ETFs
offer.
As an ETF that embraces the commodities/materials aspect of
the Canadian economy, TSXV has seen its shares slide 7.3% in the
past month has the commodities trade has been punished. A 38%
allocation to energy stocks has obviously been a problem for the
fund, but TSXV's secret sauce for a potential rebound is its
exposure to gold miners, something the ETF is rarely given credit
for.
Metals miner Rio Alto is TSXV's second-largest constituent
with a weight of 11%. Of the ETF's top-12 holdings, ten are
engaged in the mining of gold and silver and those stocks combine
for over 40% of the fund's total weight. Overall, more than half
of TSXV's weight is devoted to precious metals mining firms,
implying this is an ETF that will benefit as the miners regain
prominence and start either participating in gold and silver's
upside or outperforming the underlying metals outright.
TSXV's caveat isn't the volume or the fees, it's the oil
exposure, which is to say more quantitative easing would surely
help this fund because there's no getting around the fact that
oil demand is slack at the moment. Looking at the chart, the
$9.25-$9.60 area is probably safe to nibble on TSXV with a stop
at $8.40. If the 200-day moving average is cleared, TSXV could
run to $11.50-$12.
For more on ETFs with exposure to Canada, please click
HERE
.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.