Getting Near Time to Gamble on Gold Miners ETFs

It might feel like an eternity since physically-backed gold exchange traded funds and gold and silver miners ETFs were impressing investors, but the reality is those good times were seen in the early stages of 2014.

The past six months have been a different, more dour story. Over that time, the SPDR Gold Shares (NYSEArca: GLD) has tumbled 8.3%. Miners ETFs have been much, much worse. Over that period, the Market Vectors Gold Miners ETF (NYSEArca: GDX) has plunged 19.5%, bad enough to almost be in a bear market. [What’s Happening With Miners ETFs]

The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), the second-largest miners ETF after GDX, has shed 25% over the past six months With statistics like that, it would appear that the path of least resistance for the miners is lower, but in what could be a replay of a scenario that started in late 2013 and persisted into the early stages of this year, sellers may be getting tired with gold miners and ETFs like GDX and GDXJ.

Last Friday, GDX surged 6% on better than double the average daily volume. GDXJ added 6.8%, also on more than double the average turnover. Some technicians see GDX’s Friday action as a possible harbinger of more near-term upside to come.

GDX “last week hit its Fibonacci 161% extension level and in doing so, looks to have created a bullish wick at this potential support level,” said Chris Kimble of Kimble Charting Solutions.

Chart Courtesy: Kimble Charting Solutions

The bullish action in GDX and GDXJ could not come at a better time. Over the past month, four of the 12 worst-performing exchange traded products are miners ETFs, a quartet that includes GDX and GDXJ.