Tag Archives: gdx

GDX: Gold’s Resurgence Can Keep Rising

By Brenton Garen and Tom Lydon An obvious though still impressive beneficiary of gold’s resurgence this year is the gold mining industry and its corresponding exchange traded funds. That includes the Market Vectors Gold Miners ETF (NYSEArca: GDX ) , the largest and most heavily traded gold miners ETF. GDX is up 50% year-to-date. Not only is that good for one of the best performances among non-leveraged ETFs, it also puts GDX up nearly three times as much as ETFs that hold physical gold. That does not mean GDX and rival gold miners ETFs are perfect investments, not when the industry still faces headwinds. Strategists point out that costs keep rising, which has narrowed profit margins among gold miners. Recent mine closures have not improved margins. Current mining operations are also facing deteriorating ore grades. The recent decline in energy prices and depreciating currencies where local miners operate have also had minimal beneficial impact on cash costs. Gold is seeing greater support from safe-haven demand after currency devaluations across Asia added to investment demand for a better store of value than paper currencies or stocks and bonds. Gold assets look more attractive in a low interest rate environment as the precious metal is more competitive against assets that pay low interest, like bonds. Additionally, if the Fed holds off on further rate hikes, it would suggests the economy is not as strong, which would also help gold attract safe-haven demand. “I believe this could be due to the fact that the cash cost of mining the yellow metal has not only been constantly below the gold price, but also falling. For miners, any increase in the price of gold can push the income as well as profit margins even higher,” according to a Seeking Alpha analysis of GDX. Supporting miners and GDX is the dollar, which has quickly weakened. The greenback is being weighed down on speculation that ongoing uncertainty may force the Federal Reserve to refrain from hiking interest rates in the near future. Consequently, a weaker USD makes alternative assets like metals more attractive . Market Vectors Gold Miners ETF Click to enlarge Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Precious Metal Mining ETFs Head To Head: GDX Vs. SIL

Precious metals such as gold and silver are enjoying a reprieve these days, thanks to the weak September U.S. job data that has dented the possibility of an interest rate hike later this month or may be this year, which could have been the first in nearly a decade. Both the yellow and white metals were out of investors’ radar for most of the time this year. The blame goes largely to the prospect of an interest rate hike this year, a strengthening dollar, muted inflation across most developed nations and slowdown in key consuming countries like China. At London Gold Fixing , both gold and silver were down 9.2% and 12.4%, respectively, in the year-to-date time frame. However, the below par jobs’ report has raised questions over the health of the U.S. economy and the fate of the looming Fed policy tightening. Headline job gains for September came in at 142,000 versus estimates of 200,000 and the prior month’s tally of 136,000. The weak U.S. data has also disturbed the case of a stronger dollar. The Wall Street Journal Dollar Index , which measures the greenback against a group of 16 widely traded currencies, fell 0.6% to its two-week low of 87.96 yesterday. These factors are compelling investors to turn their focus on precious metals as a store of wealth and a hedge against market turmoil. Both the metals are regaining its luster lately. Yesterday, spot gold reached its highest level of $1,151.20 per ounce in nearly two weeks (since September 24), while silver touched its highest level of $16.08 per ounce in more than three months. However, if both the metals are compared head to head, the outlook for gold is stronger than silver. This is because gold has greater storage value than silver and a lift-up in Fed rates that seemed imminent before the jobs report seems unlikely in the near future. According to CME Group’s FedWatch program , traders are playing on a 31% chance of a rate hike this December, down from 44% before the release of the weak jobs data. Therefore, the yellow metal definitely has a stronger case given the prevailing near-zero interest rates, lowering the opportunity cost of holding the metal, and weakening dollar, which is the key to gold’s movement. On the other hand, silver is used in a number of key industrial applications. But the demand for silver as an industrial metal doesn’t look that good given global growth worries and decline in manufacturing activity across the world driven by the persistent decline in oil prices, slowdown in China, and continued weakness in Euro zone and Japan. In this scenario, it would be intriguing to look at two top performing gold and silver ETFs and their key differences. Market Vectors Gold Miners ETF (NYSEARCA: GDX ) This ETF tracks the price and yield performance of the NYSE Arca Gold Miners Index, which provides exposure to publicly-traded companies worldwide involved primarily in gold mining. The fund holds 36 stocks in its basket. Goldcorp Inc. (NYSE: GG ), Newmont Mining Corporation (NYSE: NEM ) and Newcrest Mining Limited ( OTCPK:NCMGY ) occupy the top three positions in the basket with shares of 7.5%, 6.1% and 5.6%, respectively. Canadian firms dominate the fund’s portfolio with a 52% share, followed by U.S. (15.5%) and Australia (10%). The product has amassed over $5 billion in its asset base and trades in solid volume of around 48 million shares a day. It charges investors 53 bps in fees per year. The fund shed around 14.7% so far this year but was up 15.6% in the past one month (as of Oct 6, 2015). Global X Silver Miners ETF (NYSEARCA: SIL ) This ETF follows the price and yield performance of the Solactive Global Silver Miners Index, measuring the performance of the silver mining industry. The fund holds 24 stocks in its basket. Industrias Penoles Cp, Silver Wheaton Corp. (NYSE: SLW ) and Silver Standard Resources Inc. (NASDAQ: SSRI ) are the top three holdings in the fund with allocations of 11%, 10.6% and 7.9%, respectively. The ETF is also highly focused on Canadian firms with a 58% share, followed by U.S. (12.3%) and Mexico (11.1%). SIL has gathered $146 million in assets and charges 65 bps in fees. It trades in an average volume of more than 231,000 shares. The product was down 20.1% in the year-to-date period but was up 13.7% over the last one month. Both GDX and SIL look like a pure play on the precious metal market. However, GDX is notably cheaper and has much higher liquidity than SIL. Further, GDX focuses on top mining companies and fared well in terms of price performance compared to SIL. Finally, GDX seems a better option to ride on the comparatively bullish outlook of gold vis-à-vis silver. Original Post

Will Gold Miner ETFs Turn Around In Q4?

The September U.S. jobs data released on Friday signaled a sudden halt in the pace of job growth and has dented the chance of an interest rate hike later this month, which could have been the first in nearly a decade. While this ushered gains on several asset classes, gold mining was among the huge beneficiaries. The metal lost its allure long back, thanks to an increased prospect of an interest rates hike this year, a strengthening dollar, muted inflation across the most developed nations and slowdown in key consuming countries like China. Occasional geopolitical flare-ups and even a risk-off trade sentiment could not save this safe-haven yellow metal. As a result, the biggest gold ETF – the SPDR Gold Trust ETF (NYSEARCA: GLD ) – is off 4% this year. The decline was more pronounced in the gold mining ETF space, which trades as a leveraged play of the underlying metal. The largest gold mining ETF – the Market Vectors Gold Miners ETF (NYSEARCA: GDX ) – is down over 21% this year. However, things appear to be stabilizing at the start of Q4 (read: ETF Winners & Losers Post Dovish Fed Meet ). What Gives Gold Miners a Bounce to Start Q4? The below-par jobs report has raised questions over the health of the U.S. economy and the fate of the looming Fed policy tightening. Headline job gains for September came in at 142K versus estimates of 200K and the prior month’s tally of 136K. The originally reported tally for July was also revised lower to 223K from 245K originally. The year-to-date monthly pace of job gains now averages at 198K, though the pace for the last three months is much lower at 167K. This compares to the monthly average of 260K for 2014. In any case, subdued inflation and a faltering global backdrop were always the deterrents to the looming Fed action. Only solid job numbers kept the likelihood of a sooner-than-expected Fed rate hike alive. So, the latest bit of employment information did magic for the gold and the related ETFs, and the demand for the metal seems to have returned with the start of the fourth quarter on a weakening dollar. On Friday, dollar ETF – the PowerShares DB USD Bull ETF (NYSEARCA: UUP ) – lost about 0.24% while GLD and GDX were up over 2.1% and 8.1%, respectively. Gold miners delivered two successive years of losses in 2013 (down 50%) and 2014 (down 16%) and are on their way to imitate the prior performances this year too. It goes without saying that such huge sell-offs have made the metal’s valuation so cheap that any single driver would easily take it to new heights. Moreover, an unsteady global macroeconomic backdrop will likely keep the market rocky throughout Q4 and brighten the appeal for safe investments. Since gold serves this purpose efficiently, Q4 can essay a turnaround story for gold this year (read: Short-Term Respite for Gold ETFs? ). Time to Buy Gold Miners ETFs? Despite the great start to the quarter, the fundamentals are still not strong. Investors should note that this job data induced leap is likely to be short-lived. Sooner or later, the Fed will start tightening policies. Basically, gold miner ETFs are presently sitting on the fence with possibilities and perils on each side. The bullish trend for gold mining ETFs could continue in the weeks ahead if more choppy economic data comes in, the rate hike possibility keeps getting delayed, or some political issue creeps in. Thus, investors who go by the belief that “the trend is your friend” might take a look at these gold mining ETFs to make some quick bucks. GDX in Focus This is the most popular and actively traded gold miner ETF with an AUM of $4.7 billion and average daily volume of around 65 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 36 stocks in its basket. Canadian firms account for 55.1% of the assets, followed by the U.S. (13.2%) and South Africa (10.4%). The fund charges 53 bps in annual fees and returned over 8% on October 2 (see: all the Material ETFs here ). Sprott Gold Miners ETF (NYSEARCA: SGDM ) This fund follows the Sprott Zacks Gold Miners Index, holding over 25 stocks in its basket. The product is skewed toward mid caps at 56% while the rest goes to small caps. The fund has amassed $108.3 million in its asset base and trades in a good volume of over 90,000 shares a day. It charges 57 bps in annual fees from investors. SGDM added about 8.2% on October 2. iShares MSCI Global Gold Miners ETF (NYSEARCA: RING ) This fund is the cheapest choice in the gold mining space, charging just 0.39% in fees and expenses. The fund has been able to manage assets worth $44 million while it trades in moderate volume of 105,000 shares. The ETF follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 29 securities in its portfolio. Country holdings are also similar, with Canada as the top country, followed by South Africa and the U.S. The fund was up over 7.4% On October 2. Original post