An exchange traded fund indexed to small-cap gold miner stocks is among the best unleveraged ETFs over the past month with a gain of nearly 30%. Are miner ETFs going to finally catch up to the price of gold?
Market Vectors Gold Miners (NYSEArca: GDX) is a large-cap version. The two miner ETFs were on the list of top-performing funds last week after the Federal Reserve indicated it would keep rates ultra-low through 2014. [Gold Miner ETFs Soar After Fed’s Low-Rate Pledge]
Miner ETFs, which invest in stocks, have been lagging bullion prices in recent years but some analysts are looking for the shares to close the performance gap in 2012. [Miner ETFs Bounce Off 52-Week Lows]
Gold and miner ETFs gained ground last week after the U.S. reported disappointing GDP data.
“The unresolved European debt crisis also adds uncertainty to the world economic outlook. Given that gold is seen as a good inflation hedge and a ‘safe haven’ when the U.S. dollar is weakening, investors have been flocking to gold and gold ETFs,” writes Howard Arnn at Wall Street Window. “As a testimony of the investors’ bullish sentiments about gold, the precious metal hit 6 ½ week highs last Thursday, following the Fed’s announcement.”
The large-cap Market Vectors Gold Miners was up 11.1% year to date as of Jan. 27, according to Morningstar.
“Given the current climate of extremely low interest rates, which are likely to stay this way for the next two years, analysts are bullish on gold mining companies, which can make use of the low rates to increase capacity by building up local mining infrastructure,” Arnn noted. “Nonetheless, technical analysts believe that after such a sharp upward spike, investors are likely to sell to lock in some profits.”
Market Vectors Junior Gold Miners
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.