With the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) down 11.1% and 20.5%, respectively, year-to-date, it is not unreasonable to think investors in the two popular ETFs are hoping for a gold miners Santa Claus rally.
There are signs that wish may be granted. For example, despite lingering weakness in gold futures and ETFs such as the SPDR Gold Shares (NYSEArca: GLD), that has not been enough to compel gold miners to increase hedging. Miners hedge production to lock in current prices for future output and the lack of recent hedging could be a sign that the companies extracting gold from the earth do not expect the yellow metal to fall much further.
“Gold miners are still not hedging their future production despite the recent price-drop to new 4.5-year lows, says the latest expert analysis, as zero interest rates and falling energy prices are deterring forward sales to lock in current prices,” reports Bullion Vault.
Adding to the long gold miners thesis are some bullish technical signs, including GDX’s relative momentum perking up even as the ETF recently made new lows, notes Chris Kimble of Kimble Charting Solutions. That could be a sign of bullish divergence that could give way to positive price action.
Chart Courtesy: Kimble Charting Solutions