Searching for a Bottom in the Junior Miners ETF

“The number of financings for the junior exploration companies has suddenly and sharply dropped off a cliff as the mania that engulfed the space in the spring and summer has evaporated into nervousness and despair. Declining deal flow is normal into any correcting market but the severity of the plunge is bullish,” according to ETF Daily News.

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.

Related: 31 Gold ETFs Investors Should Size Up

Said another way, during gold’s bear market, miners looked to improve their balance sheets by cutting production and selling assets. So even as gold prices surge, there is not a rush within the mining sector to immediately boost production.

“The Commitment of Traders report for tomorrow is going to see another sharp improvement as gold open interest has shrunk to 500,328, and that is down from 544,824 on October 4. This is the large Commercials unwinding their massive short position in gold futures and is normally a precursor for a reversal. However, it is not to be used as a timing tool as the unwinding can take weeks to play out,” adds ETF Daily News.

For more information on the Gold ETFs, visit our Gold category.