Gold Miner ETFs May be Near Turning Point

Gold miner exchange traded funds may be gathering strength to finally outperform bullion on low valuations and a shift to gold-related stocks.

Gold producers are heading for an “inflection point” triggering a rally, Barrick Gold Corp. (NYSE: ABX) CEO Aaron Regent told Bloomberg.

Miner ETFs have lagged bullion prices by a wide margin in recent years during gold’s relentless march higher. [Gold ETFs on a Tear as Metal Pushes Toward $1,800]

They have been punished as investors decided the shares should no longer trade as a proxy for physical gold, Regent said in the Bloomberg article. [Silver Miner ETFs Keep Pace with Metal’s Price Rise]

The rising popularity and ease of investing in gold ETFs has likely diverted money away from miner stocks. [Gold Miner ETFs Look to Catch Up to Bullion in 2012]

The NYSE Arca Gold BUGS Index, a benchmark of gold miners, has advanced 53% in the past five years while spot gold traded in London has more than doubled, according to Bloomberg. [Small-Cap Gold Miner ETF Jumps Nearly 30% in a Month]

The index trades at about 17 times earnings, compared with an average of 65 over the past 10 years. The ratio fell to a decade low of 15 on Jan. 20. [Gold Miner ETFs Rise to Test 200-Day Average]

Gold miner ETFs include Market Vectors Gold Miners (NYSEArca: GDX) and Market Vectors Junior Gold Miners (NYSEArca: GDXJ).

“There will be a point where the multiples just converge with every other company,” Regent said in the report. “Then you will start to see potentially increased leverage in the share price versus a gold price move.” [Gold Miner ETFs May Bring in Dividend Hunters]

Market Vectors Gold Miners

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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