Exchange traded funds that invest in gold miner stocks fell more than bullion-backed ETFs during Thursday’s sell-off in precious metals in what has become a familiar pattern this year.
Market Vectors Gold Miners (NYSEArca: GDX) fell 2.5% at last check Thursday while iShares Gold Trust (NYSEArca: IAU) slipped 1.8%. [Gold ETFs Down on ECB Comments]
Year to date, the miner ETF is down 4% while the gold fund has gained 22%, not including Thursday’s action. [Gold Miner ETF Aims for 2011 High; Einhorn Buys]
Leveraged ETFs indexed to miner stocks such as NUGT (Direxion Daily Gold Miners Bull 3X) and DUST (Direxion Daily Gold Miners Bear 3X) were seeing big moves Thursday as the sector fell. [ETF Chart of the Day: Gold vs. Miners]
Investors must understand that gold and gold stocks “are entirely different markets that share different performance in a panic or crisis,” writes Jordan Roy-Byrne at The Daily Gold. “Gold can be a safety hedge, but gold stocks most certainly are not. They are the worst performers in any type of crisis.”
A small-cap ETF, Market Vector Junior Gold Miners (NYSEArca: GDXJ), is off 25% so far in 2011.
“The good news is the gold equities are coming to the end of the consolidation, and a resolution within months is likely. Sentiment is bullish from a contrary perspective. The consolidation has weeded out the weak and impatient as earnings and cash flows for gold companies have improved and stock valuations have moved to multiyear lows,” Roy-Byrne said.
“Even in gold and silver we see that speculative long positions are near multiyear lows. This setup combined with the forthcoming monetization in Europe, stimulus in China, and more monetization from Fed Chairman Ben Bernanke could produce quite the launch pad for the gold shares in early 2012,” the editor predicted.
Market Vector Junior Gold Miners
