While the economy languishes, mining stocks and sector-related exchange traded funds are flourishing and are experiencing their best rally since the financial downturn.
Leading the charge on Thursday, the iShares MSCI Global Silver Miners ETF (NYSEArca: SLVP) bounced 7.8% higher, Global X Copper Miners ETF (NYSEArca: COPX) jumped 6.3% and Market Vectors Gold Miners ETF (NYSEArca: GDX) gained 5.1%. GDX is now trading back above its long-term, 200-day simple moving average.
Meanwhile, the SPDR Metals & Mining ETF (NYSEArca: XME) increased 5.1% on Thursday, and the broader materials was the best performing S&P 500 sector, with the Materials Select Sector SPDR (NYSEArca: XLB) up 2.3%. XME was trading back above its 50-day simple moving average, but XLB remains below both its long- and short-term trend lines. [Precious Metals, Miner ETFs Shine]
After plunging past their financial crisis lows on waning Chinese demand and concerns over a rising rate environment, mining stocks are seeing their biggest rally since 2008, Bloomberg reports.
Supporting the downtrodden sector, the U.S. dollar has quickly weakened. The greenback is being weighed down on speculation that ongoing uncertainty may force the Federal Reserve to refrain from hiking interest rates in the near future. Consequently, a weaker USD makes alternative assets like metals more attractive. [U.S. Dollar ETF Falls Below Long-Term Trend]
“It’s a perceived U.S. dollar weakness that is driving all this,” Hunter Hillcoat, an analyst at Investec Plc, told Bloomberg “The response has been staggering and we feel it has been exaggerated by the thinness of the equity market.”
Moreover, China, the world’s biggest consumer of metals, has raised its growth target for the first time in two decades, anticipating the economy will expand 6.5% to 7% this year.
“That growth target would be extremely bullish for industrial metal prices,” Michael Smith, the president of T&K Futures and Options Inc., told Bloomberg. “It should spur demand and gobble up some of the excess supplies that we have.”
SPDR Metals & Mining ETF
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.