Gold futures closed at their lowest levels since June Monday, with well-known exchange traded funds following suit. The SPDR Gold Shares (NYSEArca: GLD) and the iShares Gold Trust (NYSEArca: IAU) each finished lower by about 1.1%.
That glum Monday showing comes on the heels of data that indicate investors and traders are backing away from gold and gold ETFs. The net-long position in futures and options is at its lowest in 11 weeks after speculators added the most short bets in three months,” report Megan Durisin and Lydia Mulvany for Bloomberg, citing data from the U.S. Commodity Futures Trading Commission.
Last week, GLD and IAU lost $378.3 and $7.4 million in assets, respectively, but those outflows have not yet trickled down to gold miners ETFs. At least not in a big way. [Gold ETF Departures on the Rise]
For the week ended Sept. 5, the Market Vectors Gold Miners ETF (NYSEArca: GDX) actually pulled in almost $4 million while the newly minted Sprott Gold Miners ETF (NYSEArca: SGDM) added $1.1 million in new assets. SGDM is not yet a month old and already has 1.6 million shares outstanding, according to issuer data.
One of the more egregious offenders among gold miners ETFs is the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), which saw outflows of $11.7 million last week. GDXJ is $80 million lighter since the start of the third quarter, but that is less than half the third-quarter outflow of $166 million from GLD. GDX has impressively pulled in $351.3 million even as GLD has lost 5.5%.
The divergence of flows into gold miners ETFs and out of physically-backed funds is not new. A similar scenario was spotted late in the second quarter. That gave way to GDX and GDXJ surging 18.7% and 26.6%, respectively, in June. [Gold ETFs, Miners Flows Diverge]
The risk is that miners ETFs have a well-established vulnerability to lower gold prices, a fact confirmed by GDX falling 3.5% on Monday on volume that was more than 44% above the daily average. GDX closed below its 200-day moving average for the first time since June.
At times like this, looking at leveraged miners ETFs can be instructive for those willing to depart from the herd. Consider the following. Since the start of September, two of Direxion’s three best-performing triple-leveraged bear ETFs are the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST). Yet investors have pulled money from those ETFs over the past 30 days, according to issuer data.
Conversely, the Direxion Daily Junior Gold Miners Index Bull 3x Share (NYSEArca: JNUG) and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) are two of September’s worst-performing leveraged bull ETFs sponsored by Direxion, but investors have added new money to those ETFs over the past month.
Market Vectors Gold Miners ETF
Tom Lydon’s clients own shares of GLD.