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, have lost some steam in recent days, but data suggest traders have recently been flocking to GDXJ.
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.
“While February is the shortest month of the year, inflows into the VanEck Vectors Junior Gold Miners exchange-traded fund (GDXJ) have already set a record at almost $926 million,” reports Luke Kawa for Bloomberg. “That’s about 60 percent more than its much larger, more conservative peer — VanExck Vectors Gold Miners ETF (GDX) — had attracted this month through Feb. 24. Junior miners are seen as riskier because of their smaller, and in some cases, uncertain asset bases.”
GDX is more than double the size of GDXJ, but the latter can still easily be considered a “large” ETF with $5.3 billion in assets under management as of Feb. 27, according to issuer data.
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.
“Gold mining companies have rallied along with other precious metal as real interest rates, which jumped after the U.S. election, have been retreating. Strategists at UBS Group AG have predicted that rising market-based measures of inflation expectations will push real rates lower and propel gold toward $1,300 per ounce,” according to Bloomberg.
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