After the Swiss National Bank shocked financial markets by scrapping the franc’s peg to the euro, GLD gained about 3% Thursday, moving above its 200-day moving average for the first time since September, stoking speculation that the franc’s rally could spark a commodities countertrend that would ignite a raft of short covering across the commodities complex. [Swissie Could Spark Commodities Rally]
Since the start of this year, GDX and GDXJ, the two largest gold miners ETFs have added almost $313 million in new assets combined.
“The explanation for why some investors are finally going long of the miners is simple: A sharp drop in energy prices, positive foreign currency effects, major cost reduction programs and gold prices that have recovered to within 2% of year-ago levels. Against that backdrop, the gold miners should finally recover,” said Rareview Macro found Neil Azous in a note out Tuesday.
The impact of lower fuel prices for gold miners should not be overlooked. Miners are also benefiting from lower oil prices. Barrick Gold (NYSE: ABX), the world’s largest gold miner and the second-largest holding in GDX at 7.4% of GDX’s weight, could save up to $25 per ounce of gold produced thanks to lower diesel prices, according to Bullion Vault. [Production Conundrum for Gold Miners ETFs]
Tom Lydon’s clients own shares of GLD.