Prospecting the Gold and Silver Miner ETFs

September 10th at 2:28pm by Tom Lydon

Gold miner ETFs have been outperforming bullion prices since mid-July. Following several false starts, the question is whether miner shares are finally ready to lead precious metal prices.

After a prolonged disparity between the performance of physical precious metals and mining companies, the disconnect between the commodities and stocks has finally shifted as investors jump on the cheap valuations.

In August, gold miners gained 12%, or twice that of gold prices, while silver miners jumped 17%, compared to 14% rise in physical silver, reports Jason Kephart for InvestmentNews.

Precious metals miners have been among the top performing ETFs in the last week:

  • iShares MSCI Global Silver Miners Fund (NYSEArca: SLVP): up 10.7% over the past week.
  • Global X Silver Miners ETF (NYSEArca: SIL): up 9.2% over the past week.
  • Global X Pure Gold Miners ETF (NYSEArca: GGGG): up 7.6% over the past week.
  • Global X Gold Explorers ETF (NYSEArca: GLDX): up 7.4% over the past week.
  • PowerShares Global Gold & Precious Metals ETF (NSYEArca: PSAU): up 7.2% over the past week.
  • Market Vectors Trust Gold Miners (NYSEArca: GDX): up 6.8% over the past week.

In comparison, SPDR Gold Trust (NYSEArca: GLD) was up 2.7% and iShares Silver Trust (NYSEArca: SLV) gained 7.6% over the past week. Gold futures are back up to $1,740 per ounce and silver futures are at $33.7 per ounce.

“The disparity between gold prices and the mining companies is fairly wide now,” Lew Altfest, chief investment officer at Altfest Personal Wealth Management, said in the article. “That makes the gold stocks reasonable.”

“There’s been a secular shift,” Dan Denbow, portfolio manager of the USAA Precious Metals and Minerals Fund, said in the article. “Before 2003, you had to buy a mining company to get exposure to gold. Now there’s a way to get exposure to the gold price without taking on any company risks. We’ve seen $125 billion go into physical gold ETFs since 2003. The demand has come at the expense of the mining companies.”

Nevertheless, Denbow expects mining stocks to move closer with the precious metals as the industry takes on lucrative projects and cuts back less-profitable projects. Additionally, some have even enticed investors with dividend payouts. [The Case for Gold Miner ETFs]

Last week, Global X Funds launched the Global X Junior Miners ETF (NYSEArca: JUNR).

For more information on gold or silver miners, visit our gold miners and silver miners categories.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GDXJ.

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.