An exchange traded fund that invests in small-cap gold miners fell more than 7% on Tuesday to a new all-time low as more investors use bullion-backed ETFs for exposure to the precious metal rather than miner shares.
Market Vectors Junior Gold Miners (NYSEArca: GDXJ) was down 30% over the past three months heading into Tuesday’s sell-off. [Will Miner ETFs Finally Emerge from Gold’s Shadow?]
Its large-cap counterpart Market Vectors Gold Miners (NYSEArca: GDX) slipped nearly 4% on Tuesday. [Are Bullion ETFs Responsible for Gold Miners’ Dismal Performance]
Albert Friedberg, one of Canada’s top hedge fund managers, believes physical gold is a much better bet than shares of producers, reports Martin Mittelstaedt for The Global and Mail.
As a result of the extra liquidity central banks have pumped into the markets, along with record low interest rates, he thinks physical metals will benefit in the long run.
Institutional investors are trading on this trend; however, they are favoring bullion-linked ETFs. Consequently, gold stocks no longer carry the premium multiples they once did and now trade at valuations similar to other metal producers, he explained.