If mining exchange traded funds could express emotion, those that hold shares of gold and silver miners are probably counting the days until 2013.
As has been well-documented throughout this year, gold and silver mining ETFs have absorbed some brutal treatment. That is not surprising when the largest physically-backed gold and silver ETFs are down 26.1% and 34.6%, respectively.
Mining ETFs have been worse as the Market Vectors Gold Miners ETF (NYSEArca: GDX) and Global X Silver Miners ETF (NYSEArca: SIL) are each down more than 50% this year. [Another Bad Day for Mining ETFs]
Not all mining ETFs have struggled this year. A smaller, new entrant to the fray has been impressive and looks like a diamond in the rough. No pun intended. That ETF is the PureFunds ISE Diamond/Gemstone ETF (NYSEArca: GEMS), which in layman’s terms is the diamond equivalent of an GDX or SIL. Except for when it comes to returns. [A Precious Gems ETF for the Holidays]
Over the past six months, GDX and SIL are down an average of 19.2%. Over that same time, GEMS has jumped 14.5%. Earlier this month, GEMS added one of the biggest names in the diamond business to its 25-stock lineup.
Alrosa is primarily a diamond company involved in the exploration and production of diamonds and gemstones throughout Asia and Africa. By volume, Alrosa is the world’s largest producer of rough diamonds, according to PureFunds.
With the addition of Alrosa, GEMS no offers exposure to six countries: The U.K., Hong Kong, Canada, the U.S., Japan, Singapore and Russia. Hong Kong, Canada and Singapore are all developed markets with AAA credit ratings.
Despite the weakness in the commodities space, diamonds are shining, supported by the rising middle class in the emerging markets. “. In addition, new demand is coming from investors of hard assets, as confidence in government issued currencies deteriorates. Given these favorable demand dynamics, there have only been a few new major gemstone mines in development over the last decade, as new supply is becoming more and more difficult to find,” according to the GEMS web page.
PureFunds ISE Diamond/Gemstone ETF
