As has been widely documented, gold miners stocks and the related exchange traded funds are getting drubbed this year. The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks, entered Monday with a year-to-date loss of more than 22%.
An overlooked scenario is one of the reasons why gold mining equities are flailing this year. In July, Vanguard, one of the largest issuers of ETFs and index funds, said it is revamping a fund that previously focused on miners.
That fund will be renamed the Vanguard Global Capital Cycles Fund and will feature significantly less exposure to precious metals miners than its previous version.
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“The new fund will focus on telecommunications and utilities, with only ~25% exposure to precious metals and mining,” according to Seeking Alpha.
Traders willing to wager on more declines for gold miners can consider the inverse leveraged Direxion Daily Gold Miners Index Bear 3X Shares (NYSEARCA: DUST) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEARCA: JDST).
DUST seeks daily investment results, before fees and expenses, of either 300% or 300% of the inverse (or opposite) of the performance of the NYSE Arca Gold Miners Index.
Meanwhile, JDST seeks daily investment results, before fees and expenses, of 300% or 300% of the inverse (or opposite) of the performance of the MVIS Global Junior Gold Miners Index.
Gold Selling Pressure
The fund has about $2.30 billion in assets under management, but its departures from gold mining equities have been enough to roil markets, particularly because that selling is happening as the price of gold slumps. Alone, falling gold prices are usually enough to send investors fleeing gold mining stocks and ETFs such as GDX.
“The move, which has triggered heavy selling of gold mining stocks since Vanguard initially unveiled its plan in late July, is another sign of how investors have fallen out of love with the yellow metal,” according to Seeking Alpha.
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Without a substantial rebound in gold prices, it is hard to predict when the miners will bounce back.
“A lackluster gold price has been a key reason behind the sector’s dismal performance this year, but the gold mining industry also has lost the trust of big institutional investors after years of overspending and excessive executive pay,” notes Seeking Alpha.
For more information on the gold market, visit our gold category.