Ebullient sentiment toward gold miners exchange traded funds is continuing Friday. Coming into today, six of the top 10 best non-leveraged ETFs in still young 2015 were gold and silver miners funds.
To this point in Friday’s session five of the top 11 exchange traded products on an intraday basis are gold and silver miners ETFs. The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) is leading the way with a 3.8% gain. GDXJ, the second-largest gold miners ETF behind stablemate the Market Vectors Gold Miners ETF (NYSEArca: GDX), entered Friday as the best non-leveraged to this point in 2015 with a gain that is now 14.2%.
Technical indicators say the current rally for miners ETFs has room to run.
“GDX & GDXJ created bullish falling wedges at falling channel support, which was a nice pattern to see. Two-thirds of a time this pattern leads to rising prices. When the falling wedge takes place at channel support, odds are even higher, that upside price action take place,” according to Chris Kimble of Kimble Charting Solutions.
Importantly, GDXJ has been leading GDX in recent weeks, a sign that investors are embracing a higher level of risk to participate in the miners rally.
When the GDXJ/GDX ratio is falling, the former is weakening even more rapidly than the latter, but that scenario is abating with GDXJ outpacing by 260 basis points to start 2015. The GDXJ/GDX ratio does not command the same attention as other financial market ratios, but lack of popularity does not diminish the ratio’s potency. [Obscure Ratio Signals Upside for Miners ETFs]
The strength in GDX and GDXJ is trickling down to rival ETFs, too. For example, the Sprott Gold Miners ETF (NYSEArca: SGDM), which debuted in July, is up nearly 10% this year. SGDM , a smart beta spin on gold miners, confirms that investors remain loyal to miners ETFs. The new fund needed less than six months of work to attract $100 million in assets under management. [Sprott Miners ETF Tops $100M in AUM]
SGDM tracks the Sprott Zacks Gold Miners Index, which seeks to emphasize gold stocks with the highest quarterly revenue growth measured on a year-over-year basis and stronger relative balance sheets as measured by long-term debt to equity,” according to Sprott.
“Many junior gold companies are coping with low gold prices by re-engineering projects to reduce capital requirements. A lower cost alternative is heap leaching, where ore is stacked on impermeable liners in «heaps». A drip system is applied to dissolve the gold from the rock in a closed circuit that recirculates the spent solution. No milling and fewer moving parts are required, so the capital cost is much less than other methods of extraction. This has enabled junior developers in Nevada, Mexico, Peru, Burkina Faso, and elsewhere to move forward with economically viable projects,” said Van Eck Global Senior Gold Strategist Joe Foster in a note out in December.