Gold miners exchange traded funds, such as the VanEck Vectors Gold Miners ETF (NYSEArca: GDX) and the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), are still among this year’s best-performing non-leveraged ETFs and that theme could continue in the fourth quarter, particularly if the Federal Reserve does not move forward with an interest rate hike.
The Federal Reserve is seen as the primary culprit behind the recent struggles faced by gold and the related mining ETFs. The Fed meets later this week and some traders are still wagering that the U.S. central bank could unveil its first interest rate hike of 2016.
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Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
On the other hand, there is a school of thought that the Fed is now boxed into a corner and will not be able to raise rates this quarter even though some members of the central bank want that to happen.