It has been obvious in a year in which the VanEck Vectors Gold Miners ETF (NYSEArca: GDX), VanEck Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) and rival gold miners funds are among the best-performing exchange traded funds that this group is easily outpacing broader market benchmarks.
After all, GDX and GDXJ, the two largest gold miners ETFs, have each more than doubled on a year-to-date basis. However, a deeper technical look at a widely followed gold miners index reveals that index is breaking out in significant fashion against the S&P 500 on a relative strength basis, indicating miners can extend their gains.
Additionally, there is at least one positive fundamental catalyst that potentially bodes well for gold miners ETFs going forward: Peak production of gold has likely come and gone, perhaps indicating that supply will dwindle, thereby boosting bullion prices.
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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.
[related_stories]Comparing the Gold Bugs Index (HUI) against the S&P 500 “provides us with a broad view of the how the Gold miners have performed versus large-cap equities over the past two decades. As you can see below, the Gold Bugs Index outperformed the broader equities market from 2001 to 2011. But that outperformance gave way to a period of significant underperformance,” according to See It Market.
Supporting the previously controversial 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.
SEE MORE: 31 Gold ETFs Investors Should Size Up
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.
“In fact, the comeback has seen the Gold Bugs Index breakout (relative to equities) above channel resistance. Although the miners may be due for some cooling off, it’s worth noting that if this trend change resembles recent turns, it may last a while longer yet,” adds See It Market.
For more information on the Gold ETFs, visit our Gold category.
Market Vectors Gold Miners ETF
