The VanEck Vectors Gold Miners ETF (NYSEArca: GDX) and the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), the two largest gold miners exchange traded funds, are up 18.5% and 30.7%, respectively, year-to-date.
Those big gains in a small amount of time have some traders arguing that gold miners ETFs are due for a near-term pullback. GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies.
Although many market participants still expect the U.S. central bank to boost borrowing costs multiple times this year, investors are renewing their affinity for gold ETFs early in 2017. In the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates as many as three times this year, gold prices could move modestly higher with some help from emerging markets, namely China and India. However, the dollar has recently retreated in noticeable fashion, helping aid gold’s ascent along the way.
“Current prices are an important level for gold miners. A sustained breakout from the falling bear market channel would be hugely bullish. But we are not there yet, and gold is still in a falling market. We remain bearish with our Gold Miners Forecast for 2017 until proven otherwise,” reports ETF Daily News.
Gold ETFs have also been grappling with the surprising results of the U.S. presidential election. Investors widely expected gold to rally if Republican Donald Trump won the presidential election in November, 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.
Markets are pricing in multiple rate hikes from the Federal Reserve this year, but the no long the Fed holds off on boosting borrowing costs, the better for no-yield assets, such as gold and other precious metals.
“At a certain point in time, gold will turn again into a loved asset. In other words, the current long term bear market will turn into a bull market,” according to ETF Daily News.
Active traders that are not afraid of leverage can use ETFs such as the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) and the Direxion Daily Junior Gold Miners Index Bull 3X Shares (NYSEArca: JNUG).
For more information on the gold market, visit our gold category.