The VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), once one of this year’s best-performing non-leveraged exchange traded funds, is in the midst of a precipitous decline. Over the past month, GDXJ, the second-largest gold miners ETF, is off 12.5%, leaving traders and technical analysts to ponder when a the ETF will put in a proper bottom and move higher again.
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. With many investors believing the Federal Reserve is moving toward a December rate hike, precious metals and the related equities have recently been under pressure.
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Leveraged answers to GDXJ include the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares (NYSEArca: JNUG).
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.