Gold Mining ETFs: Not so Golden

November 22nd at 6:30am by Tom Lydon

Things are bad for gold exchange traded funds. ETFs such as the SPDR Gold Shares (NYSEArca: GLD) just cannot seem to get out of their own way. GLD’s 3.5% loss in the past week and 5.5% tumble in the past month affirm as much.

That is problematic for gold mining ETFs, including the largest of the lot, the Market Vectors Gold Miners ETF (NYSEArca: GDX). GDX lost 1.4% on Thursday on volume of 44.4 million shares, above the three-month trailing average of 42.9 million shares.  With a close at $22.53, GDX now resides at five-year lows and the damage done to the ETF recent days dents the theory that GDX had been putting in a technical bottom. [A Bottom Could be in for Beaten Gold Miners ETF]

GDX now trades about 42% below where it did when it debuted seven and a half a years ago. The ETF has lost roughly two thirds of its value since its September 2011 high near $66. To be fair, GDX is far from the only offender among gold mining ETFs.

The iShares MSCI Global Gold Miners ETF (NYSEArca: RING) lost 2% Thursday on volume that was more than triple the daily average. RING is down almost 53% this year. The Global X Gold Explorers ETF (NYSEArca: GDLX) dropped 1.5% on above average volume Thursday, bringing its year-to-date loss to 61%. [Metals Miners: Worst Performers Over Past Month]

The Federal Reserve is not doing GLD, GDX and friends any favors.

“This week the Fed has drawn further distinction between forward guidance and bond buying. Yes, short-term interest rates are set to remain nailed to the ground for several years ahead, which in theory is positive for gold. Theory is testing the patience of frustrated longs through rapidly weakening prices, however,” according to a Miller Tabak noted posted by Brendan Conway of Barron’s. 

In confirmation of the intensity with which GDX is currently trading, or with which sellers are attempting to punish the ETF, the fund’s trailing three-month average volume is about two and a half times that of the iShares MSCI EAFE ETF (NYSEArca: EFA) and more than double that of the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO).

GDX now ranks near the top-10 ETFs in terms of daily notional volume at close to an average of $1 billion per day.

Market Vectors Gold Miners ETF

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and EFA.

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.