Juniors Joining Big Boys in Gold Miners’ Surge
July 23rd 2013 at 8:00am by Tom Lydon
With gold futures back above $1,300 an ounce and large-cap gold miners rebounding in significant fashion, mining ETFs such as the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT), the leveraged equivalent of GDX, are drawing plenty of attention.
The allure of NUGT is understandable. Gold miners are a volatile group to begin with and they jump, the moves can be stunning. For example, GDX moved above its 50-day moving average for the first time in nine months Monday, enough to send the ETF higher by 6.1%. NUGT soared more than 18% and is now up a jaw-dropping 40% in the past week. [Gold Mining ETF Above 50-Day Moving Average for First Time in 9 Months]
It is hard to compete with a move of 18% in a single trading day or 40% in a week, but investors looking for big-move potential without leverage have options with small-cap gold mining ETFs. The most popular ETF in this group is the $1.3 billion Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ). During gold’s recent swoon, GDXJ was beaten up so severely that Market Vectors announced a 1-for-4 reverse split for the ETF son June 24. [Market Vectors to Reverse Split 7 ETFs]
That split went into effect on July 1 and since July 2, GDXJ is up 18.4%. Proving the ETF offers an alternative to GDX with a bit more horsepower without the risks of leveraged funds. GDXJ jumped almost 9% on Monday on volume that was nearly 80% of its daily average.
Another example of small-cap mining ETF on the rise is the unheralded Global X Junior Miners ETF (NYSEArca: JUNR). JUNR is small compared to GDXJ (just $4.7 million in assets under management), but the Global X is following its larger rivals higher with a one-month gain of 10.5%.
Like GDXJ, JUNR has performed admirably in the wake of a reverse split. Global X announced a 1-for-3 reverse split of the ETF in May. JUNR has a heavy non-U.S. bias with the U.S. accounting for just 17.6% of the ETF’s country weight. Canada and Australia combine for over 63%.
Market Vectors Junior Gold Miners ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of NUGT.
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.