Junior gold miner stocks dug their way to historic lows in
February, cementing their place in
infamy as the month's biggest ETF loser.
Market Vectors Junior Gold Miners ETF (
) imploded 16% in February, its fifth straight monthly drop. It
trades deeply below its 50- and 200-day moving averages, which
indicates a strong downtrend.
It has a paltry IBD Relative Strength Rating of 4 and an E
Accumulation/Distribution Rating, the lowest possible on an
A-to-E scale. It's sunk 47% the past 12 months.
A story on the
top performing ETFs
in February can be seen at investors.com at
"Investors have become risk averse, and juniors are the most
risky investments in the sector, if not in the world," Paul van
Eeden, president of Cranberry Capital, a private Canadian holding
company, said in an email.
Junior gold miners have an insatiable need for money, which
has been hard to come by, to support exploration and other
"The juniors are running out of capital and are facing
imminent extinction, hence their poor price performance," van
Eeden wrote. "Roughly half of all the companies listed on the TSX
Venture Exchange (in Canada) are trading below $0.10 and have
less than $100,000 in the bank."
Since it peaked in December 2010, GDXJ has lagged its
large-cap peer, theMarket Vectors Gold Miners ETF (
), by a wide margin. GDXJ has crashed 65% from its multiyear
GDX fell 10% in February to a 3-1/2-year low. It plunged 35%
the past year. GDX peaked in September 2011 and has tumbled 44%
from its multiyear peak.
SPDR Gold Shares (
), tracking a 10th of an ounce of the yellow metal, melted 5% in
February. After five straight months of losses, it's fallen 12%
the past 12 months. Gold futures prices ended February down 4% at
$1,604.10 an ounce, a six-month low. Gold prices have melted 10%
from their 52-week high of $1,791 an ounce in October.
GDXJ, GDX and GLD all severely lagged the global stock market
the past month and 12 months.The SPDR S&P 500 (
) added 1% in February and 10% the past year.
IShares MSCI EAFE Index (
), tracking developed foreign markets, lost 1% in February while
gaining 5% the past year;iShares MSCI Emerging Markets Index
(EEM) gave back about 2% for the month and slipped 3% the past
Promising, yet underfunded, mining projects may been able to
get financing when bullion prices improve, says Terry Sacka,
chief strategist at Cornerstone Asset Metals in Jupiter, Fla.
"Within the junior (gold mining) market, a lot of investment
money came in at the height of the last bull run," Sacka wrote in
an email. "Unfortunately, some companies fell well short on
delivering results. Mining has many facets, and startups get
caught in production pitfalls. So the market is
"I think this is an extremely healthy consolidation, which
bodes well for a substantial run the next time out," Sacka
The Prospectors & Developers Association of Canada's
annual mining convention in Toronto next week may renew
institutional investor interest in junior miners, says Paul
Zimnisky, CEO of PureFunds in Madison, N.J.