Wednesday was not a good day for gold miners exchanges as the Market Vectors Gold Miners ETF (NYSEArca: GDX) slumped 4.3%. GDX’s close at $19.64 was its first below $20 since October.
The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) fared notably worse. On more than double the average daily volume, GDXJ slid 7.2% to an all-time low. Five other miners ETFs, including leveraged plays such as the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3x Share (NYSEArca: JNUG) also ominously joined Wednesday’s all-time low club. [Enter The Bear for Gold Miners ETFs]
Wednesday’s tumble for mining ETFs was blamed on the end of the Federal Reserve’s quantitative easing program, but the trail of despair for these ETFs is far from a one-day phenomenon. GDX and GDXJ are off an average of nearly 31% this year. That puts both ETFs firmly in bear market territory, but that is not stopping some market observers from forecasting a rebound for gold miners.
“The TSX Venture Index which is made of the Canadian start ups in junior mining and high tech is hitting lows not seen since 2002 and the 2008 Credit Crisis,” writes Jeb Handwerger.
Neither GDX nor GDXJ track the TSX Venture Index, a Canadian index, but should not diminish the point of Handwerger’s point. That point being that when the TSX Venture Index reaches historical lows, as it recently did, it has a tendency to rally in significant fashion soon after putting in those bottoms.
That is potentially important to GDX and GDXJ because both ETFs are heavily allocated to Canadian companies. In the case of GDX, the largest gold miners ETF, the fund has a 63.3% weight to Canadian companies. GDXJ’s Canada weight is even higher at almost 67%. [Reasons for Miners to Rally?