Gold Slump Weighs Heavily on Precious Metal Miner ETFs

April 19th at 1:21pm by Tom Lydon

The precious metals exchange traded fund market is taking a beating as gold prices slump and most precious metal mining companies take heavy losses.

The worst performing miner exchange traded fund  is Global X Gold Explorers ETF (NYSEArca: GLDX), down 33.4% over the past month.

Gold equities are trading at their lowest level relative to gold in over 20 years, reports Soraya Permatasari and David Stringer for Bloomberg, while gold prices have plunged 13% this month alone. Two of the largest gold miners, Newmont Mining Corp. and Barrick Gold Corp., have posted losses totaling $169 billion, combined. [Prospecting the Gold and Silver Miner ETFs]

“Any company that hasn’t been focused on efficiencies and costs for the last three to four years is going to fail in this market,” said Gavin Thomas, chief executive officer of Sydney-based gold miner Kingsgate Consolidated Ltd.[Dull Gold Helps Inverse ETFs Shine]

Factors that are weighing on gold prices, such as pressure from higher stock prices, a sturdy U.S. dollar and a healthier U.S. economy have also weighed on precious metal miners.

The Market Vectors Gold Miners (NYSEArca: GDX) is down 27%, while the Market Vectors Junior Miners (NYSEArca: GDXJ) has lost 32.3% this month. The Global X Pure Gold Miners ETF (NYSEArca: GGGG) is down 29.7%, while the iShares MSCI Global Gold Miners Fund ETF (NYSEArca: RING) has suffered a 26.9% loss this month. [Gold Miner ETFs: Falling Knife or a Turnaround Play?]

The gold mining industry has faced sky-high production costs and made acquisitions that have lost money rather than attract more capital. The smaller, cash-strapped mining companies have already been tapped out prior to this week’s gold miner crash. Production shortages may ensue as too many companies are in need of financing, reports Bloomberg. [Why Gold Miner ETFs Have Lagged Gold Prices]

Silver miners have been no exception to the double-digit  losses, as PureFunds ISE Junior Silver SmallCap Miner Explorers ETF (NYSEArca: SILJ) has lost around 31.2% for the month. iShares MSCI Global Silver Miners Fund (NYSEArca: SLVP) is down 26.3% and the Global X Silver Miners ETF (NYSEArca: SIL )  is down 26.3%.

However, some investors are taking a contrarian stance, and see this pullback as a new entry point. For example, GDX has gathered $38 million in fresh inflows, and $307 million over the past week. Brendan Conway for Barron’s reports that fresh money is not flowing into GDXJ, the junior miner fund, nor into the physically backed GLD.

Market Vectors Gold Miners

SILJ, ETF, SLVP, SIL, GDX, GDXJ, GGGG, RING,

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.