The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks, is higher by 2.7% over the past month, but that lags the performances turned in by ETF backed by physical holdings of gold bullion.
However, some analysts believe gold mining stocks can join gold in moving to the upside. GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies.
“Meanwhile, Gold/Equities has broken above one trendline and has regained its 200-day moving average. It would be very bullish for Gold if Gold/FC pushed through its 200-day moving average,” reports ETF Daily News. “Those moves would likely accompany a Gold breakout through $1300/oz but more importantly, they would put Gold in a position of trading above its 200-day moving average in nominal terms and against the major asset classes (stocks, bonds, currencies).”
The dollar has been one of the worst-performing developed market currencies this year, which has been an assist to gold at various points during the year. However, some currency traders believe the dollar can rebound. While that could be seen as a stumbling block to gold, there are ways for investors to prosper with the yellow metal even if the dollar rallies.
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.
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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.
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.
“Although Gold failed to break above $1300/oz today (Friday), it remains in position to do so because of its renewed strength in real terms. As long as the US$ index does not rally hard, we expect Gold to break above $1300 and reach $1375. The gold stocks as a group have been lagging recently but in the event of a Gold breakout, we foresee significant upside potential as the group could play catch up,” according to ETF Daily News.
For more information on the gold market, visit our gold category.