Earnings season is in full bloom with some marquee names, including multiple Dow components still due to deliver results in the coming weeks. However, one high-flying sector and the corresponding exchange traded funds will be put to the earnings test in significant fashion over the next two weeks.
Starting today, a significant percentage of the NYSE Arca Gold Miners Index, the underlying benchmark for the popular Market Vectors Gold Miners ETF’s (NYSEArca: GDX), steps into the earnings confessional. Randgold Resources (NasdaqGS: GOLD), 5.1% of the NYSE Arca Gold Miners Index, reports today. [Technical Update on the Big Gold Miners ETF]
That index is also the benchmark the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) attempt to deliver three times the daily performance of, or in the case of DUST, three time the daily inverse performance.
On Friday, Goldcorp (NYSE: GG), nearly 10% of the NYSE Arca Gold Miners Index, is the big-name gold miner to deliver earnings. Goldcorp will be joined by Australia’s Newcrest Mining, almost 5% of the gold miners index, on Friday. Next week brings reports from Barrick Gold (NYSE: ABX) and Newmont Mining (NYSE: NEM), nearly a combined 14% of the index.
The gold miners’ earnings avalanche comes at a crucial time for the sector and the aforementioned ETFs. Prior to Friday when it sank 5.5% on heavy volume, there had ample enthusiasm for GDX and rival gold miners ETFs this year. Even with those Friday woes, fiver gold miners ETFs, including GDX and its small-cap counterpart, the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), rank among the top 10 non-leveraged ETFs year-to-date. [Bad Place for Gold Shorts]
Those bullish performances could be a sign that markets have priced what are expected to be troubling results from bullion producers. Last month, Goldcorp said it expects to record an impairment charge of $2.3 billion to $2.7 billion, which could negate retained earnings of $2.2 billion. Due to significant writedowns in years when gold prices sank, Goldcorp, Barrick and other members of the NYSE Arca Gold Miners Index are left with negative retained earnings, according to The Financial Post.
Investors have largely ignored that theme this year, pouring over $885 million into GDX, one of the best inflow tallies among all non-leveraged sector ETFs.
Still, there is evidence risk-tolerant traders are willing to bet there is downside to come for the miners. NUGT, the triple-leveraged bullish answer to GDX, has seen year-to-date departures of $226 million while DUST has added over $144 million in new assets. [Interesting Action in Leveraged Miners ETFs]
Direxion Daily Gold Miners Bear 3X Shares
