Coming off a rough August in which it lost 6.40%, the SPDR Metals & Mining ETF (NYSEArca: XME), which is designed to track the broad metals and mining segment, could face more challenges in September, a month in which the fund historically performs poorly.
XME tracks the S&P Metals and Mining Select Industry Index. The ETF “seeks to provide exposure to the metals & mining segment of the S&P TMI, which comprises the following sub-industries: Aluminum, Coal & Consumable Fuels, Copper, Diversified Metals & Mining, Gold, Precious Metals & Minerals, Silver, and Steel,” according to State Street.
Entering September, XME is nearly 29% below its 52-week high, almost 10% below its 200-day moving average and 5.80% beneath its 50-day line.
“Adding to the cloudy outlook for September is XME’s very makeup. The ETF’s top 10 holdings include a healthy dose of gold miners — like Royal Gold (RGLD) and Newmont Goldcorp (NEM), which last week followed the SDPR Gold Shares ETF (GLD) to new highs,” according to Schaeffer’s Investment Research. “But then there are also quite a few steel stocks, like underperforming AK Steel (AKS) and Nucor (NUE), the latter of which just joined the VanEck Vectors Steel ETF (SLX) in falling to its lowest price since October 2016.”
Examining XME Via Global Troubles
Some analysts are growing concerned that global troubles could drag down the industrial metal as well. Along with the trade concerns, copper prices were weakening on softening global economic data. The base metal is a significant component in many industries, including construction, and is widely seen as a barometer for global economic health.
In August, copper hit a bottom-barrel two-year low as chaos was ensuing in equities. Due to copper’s widespread use, particularly when it comes to home building and commercial construction, it’s a good measuring stick of how well the economy is doing. Good news: sentiment toward the red metal is improving.
“That said — keeping with the unpredictable theme for XME — there’s reason to believe that a bounce could be on the horizon, at least in the short term. The ETF is fresh off a successful test of the $24 area, which has marked major lows for XME since September 2016, after briefly acting as resistance earlier that year,” according to Schaeffer’s.
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