That does not mean it is destined for a significant pullback, but the Market Vectors Gold Miners ETF (NYSEArca: GDX) is one of this year’s best-performing exchange traded funds. GDX, the largest and most heavily traded gold miners ETF, is up a breathtaking 63.6% over the past 90 days and that has some technical analysts saying it and rival gold miners ETFs are ready to take a rest.
Strategists point out that costs keep rising, which has narrowed profit margins among gold miners. Recent mine closures have not improved margins. Current mining operations are also facing deteriorating ore grades. The recent decline in energy prices and depreciating currencies where local miners operate have also had minimal beneficial impact on cash costs.
Gold miners currently trade at about a 59% discount to gold prices since 2009, have a price-to-book value of 1.0x and an average dividend yield of 2.8%, which makes the sector look attractive from a valuation standpoint. Moreover, U.S. economic weakness and speculation of the Federal Reserve pushing back on another interest rate hike have contributed to a depreciating U.S. dollar, which has also helped support USD-denominated gold bullion.
[related_stories]“Moving on to the multiyear weekly chart, we see that the sharp rally in the GDX ETF pushed it out of a multiyear downtrending channel as marked by the black lines, and also back above its blue-100 week simple moving average for the first time since 2011. As s a result, the MACD momentum oscillator has now reached overbought readings last seen near the 2011 highs,” according to InvestorPlace.
Looking ahead, the ongoing negative interest rate environment, with European and Japanese central banks cutting benchmark rates deeper into the red to promote growth, could push investors toward gold bullion as a more stable store of wealth [Read more: Low-Rate Environment Will Help Support Gold ETFs].
“We believe that the prolonged presence of low (and now even negative) rates has fundamentally altered the way investors should think about risk and may result in a broader use of assets like gold to manage their portfolios more effectively and preserve their wealth over the long run,” the World Gold Council said in a research note.
“Finally, on the daily chart, note that the GDX over the past few sessions showed some exhaustive candles, particularly on April 20th when a failed intraday rally led to a daily closed right near the lows of the day. This was followed last Friday by another failed intraday rally and a close very near the daily lows,” adds InvestorPlace.
Other gold miners ETFs include the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) and the Powershares Global Gold and Precious Metals Portfolio ETF (NYSEArca: PSAU).
Want more Gold ETF news and analysis? Visit: www.etftrends.com/gold
Market Vectors Gold Miners ETF
