GDXJ “has been historically volatile and as of the end of April, the ETF’s portfolio had a weighted average PE of 29.4x TTM earnings and traded at 1.46x book value. Gold’s rally YTD has undoubtedly been a positive trend for gold miners, however given the ongoing risks to the gold rally and underlying issues at the Market Vectors Junior Gold Miners ETF’s constituent firms, investors should remain cautious in investing in gold mining companies or related ETFs,” according to a Seeking Alpha analysis of GDXJ.
While gold miner stocks and sector-related exchange traded funds look cheap after underperforming broader equities for years, some caution investors against betting too heavily on this area of the market as the sector rallies on strengthening bullion prices.
“While gold prices are certainly beneficial to the junior gold miners, which often produce at the margin, the companies have suffered from a weak gold price environment in recent years and many have less than stellar balance sheets,” adds Seeking Alpha.
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VanEck Vectors Gold Miners ETF