The VanEck Vectors Gold Miners ETF (NYSEArca: GDX) and the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), the two largest gold miners ETFs, gained 52.9% and 72.9%, respectively, last year.
However, looks can be deceiving. During the fourth quarter, GDX and GDXJ lost an average of almost 23%. GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies. Nevertheless, gold assets may have further room to fall if the U.S. dollar and real bond yields continue to rise.
Late last year, big-name gold ETFs have incurred double-digit losses and gold’s weakness over that span is prompting some analysts to lower their 2017 forecasts on the yellow metal. GLD and rival gold ETFs recently dealt with the Federal Reserve’s first interest rate hike of 2016 and now face the specter of up to three more rate increases next year.
Investors widely expected gold to rally if Republican Donald Trump won the presidential election earlier this month, which he did, but that thesis proved incorrect. Democratic challenger Hillary Clinton may have actually been the preferred victor for gold ETFs because historical data suggest gold performs better when Democrats are in the White House.
“Speculator net longs and commercial net shorts – are once again converging. They’ve yet to meet in the middle, but another couple of months on the current trajectory and they will. So the stage being is set for another positive stretch in gold/silver prices, and by implication precious metals mining stocks,” reports ETF Daily News.
This is a situation that is worth watching for investors considering GDX and GDXJ to start 2017.
“For a sense of what that means for the miners, the price chart of GDX, a major gold miner ETF, is instructive. After getting absolutely crushed during the last four months of the previously-mentioned multi-year bear market, it took off in January of 2016, rising by about 150% in six months. Since then it has given back about half its gains,” according to ETF Daily News.
Aggressive traders willing to bet on more declines for gold miners can consider the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST).
For more information on the gold market, visit our gold category.
