The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks, is lower by about 2% over the past week, but with gold threatening to breakthrough some important chart resistance, gold miners stocks and ETFs could see some near-term upside.
GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies. The ETF’s small-cap counterpart, the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), is also lower by about 2% over the past week.
“Although Gold’s long-term technical structure leans bullish, Gold is currently showing relative weakness. Gold against foreign currencies (Gold/FC) did not make a higher high and Gold/Stocks barely made a higher high. Both ratios may need to hold their blue support lines in order for Gold to remain above $1260/oz.,” reports ETF Daily News.
Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens.
“We see that GDX, like Gold was turned back at major resistance. GDX has now tested $25-$26 three times in the past year. On a clean break above that resistance, GDX should retest its 2016 high. It has key support above $22 and at $21. GDXJ will not gain any momentum until it breaks above the September high around $37.50. It has support at $31 and $32,” according to ETF Daily News.
Related: Gold Miners ETF Rally Has Room to Run
Since the start of the third quarter, investors have pulled $896.1 million from GDX while allocating nearly $92 million to GDXJ. Year-to-date, GDX has bled $2.9 billion while the small-cap fund has seen inflows of almost $633 million.
“The precious metals complex did not surpass its 2016 highs even though the US Dollar index made a new low. That is a negative divergence. Secondly, both miners and metals have formed a bearish reversal on the monthly charts. That is more significant than a daily or weekly reversal,” notes ETF Daily News.
Popular leveraged gold miners ETFs include the Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG), the triple-leveraged answer to the popular GDXJ. The Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) is JNUG’s large-cap counterpart.
For more information on the gold market, visit our gold category.