Comparing the Largest Gold Miner ETFs
July 31st, 2012 at 3:39pm by Tom Lydon
Gold miner exchange traded funds have become a popular tool for investors to gain exposure to gold, without investing in futures. Although gold miner funds like the Market Vectors Gold Miners (NYSEArca: GDX) do not track gold prices spot on, they do rely on the precious metals’ spot prices to keep the underlying companies healthy.
“This fund will not perfectly track the price performance of gold. These firms have enormous fixed-operating costs. Their cash flows–which are what you ultimately invest in when buying this fund–can swing much more dramatically than metal prices. That leverage, along with currency gyrations, has made this fund’s index more than twice as volatile as the spot price of gold over the past three years,” Abraham Bailin for Morningstar wrote .
GDX is the largest gold miner ETF, and there are about 16 million shares traded per day. This helps with the liquidity of the ETF. Many of the stocks in the portfolio are focused on other precious and industrial metals along with gold, so the exposure is diluted. GDX focuses solely on large-cap companies. [Will Miner ETFs Emerge From Golds' Shadow?]
As the larger gold miner companies begin to buyout the smaller companies, Market Vectors Junior Gold Miners (NYSEArca: GDXJ) has performance at stake. GDXJ specifically invests in small to mid-cap gold mining companies. With $2 billion in assets and a dividend yield of 5.72%, this is the second-largest miner fund trading, reports Commodity HQ on Seeking Alpha.[ETF Chart of the day: Gold Miners]
Similar to GDX, GDXJ does not invest purely in gold mining companies. The exposure to the specialized niche of smaller gold mining companies has proven lucrative for the time being, as GDXJ is trending at almost twice the performance of GDX over the past 2 weeks. [Gold Miner ETFs Get Back on Track]
The recent rally in gold prices has bolstered the mining stocks and ETFs lately. However, over the past 2 years, the funds have been chasing the performance of the spot price of gold. As the price of gold rises, the undervalued junior miners may continue to become buyout targets for the large-cap gold miners. [Talking Gold Miner ETFs on FOX Business]
Market Vectors Gold Miners
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.