Aided by an impressive showing by the yellow metal itself, which was aided by an unexpected surge for the Swiss franc, the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) extended runs that have the pair residing as two of the best non-leveraged ETFs to this point in the new year.
For the week, GDX and GDXJ gained 5.8% and 3.7%, respectively, with GDX, the “senior” miners ETF, capping its best three-week run since the ETF debuted over eight years ago.
“It has been a decent 3 weeks for the Gold miners ETF (GDX). Actually one of the best three weeks since the ETF was created back in 2006! All of this is taking place at the same time the Gold is attempting to break above a multi-year falling channel,” according to Chris Kimble of Kimble Charting Solutions.
Chart Courtesy: Kimble Charting Solutions
GDX and GDXJ are each up nearly 21% since the start of 2015 and with gold on the rise, investors appear comfortable betting on more upside for the miners ETFs. After rising 4.3% in the just completed trading week, the SPDR Gold Shares (NYSEArca: GLD), the world’s largest gold ETF, is now up nearly 8% this year.
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.