After slumping in April, the VanEck Vectors Gold Miners ETF (NYSEArca: GDX) is getting its groove back. Over the past month, GDX, the largest gold miners exchange traded fund, is higher by more than 10% and some technical analysts are forecasting more upside for the heavily traded miners fund.
Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
“On the 8-year chart for gold, it is now becoming apparent that a large head-and-shoulders bottom is completing. This started to form way back in 2013, so this is a big base pattern that should lead to a major bull market. Given what is set to go down in the debt and derivatives markets, it should easily exceed earlier highs,” reports ETF Daily News on GDX.
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 VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ). The Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) is JNUG’s large-cap counterpart.
ETF traders who are uncomfortable with the riskier 3x products can also track the miner space with a smaller 2x leverage. For example, the ProShares Ultra Gold Miners (NYSEArca: GDXX) and ProShares Ultra Junior Miners (NYSEArca: GDJJ) take the 2x or 200% daily performance of NYSE Arca Gold Miners Index and Market Vectors Global Junior Gold Miners Index, respectively.
“The 8-year chart for the PM stocks index proxy, GDX, also looks very similar to that for gold, except that it is somewhat upwardly skewed, which reflects the wild excitement of speculators in this sector once they sense a turn. There was a really big percentage gain during the first half of last year as it came off a really low level but, as with gold, GDX was rising to complete the head of the head-and-shoulders bottom pattern,” according to ETF Daily News.
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.
For more information on the gold market, visit our gold category.