An ETF tracking gold mining companies has gathered nearly $2 billion so far this month as investors try to time a bottom in the embattled sector.
Traders are also using leveraged ETFs in an attempt to profit from moves in volatile miner stocks.
Market Vectors Gold Miners (GDX) is one of the top-selling ETFs in September with inflows of more than $1.7 billion, according to IndexUniverse.
GDX saw record one-day trading volume on Wednesday after the Federal Reserve surprised markets with a decision not to taper its bond and mortgage purchases. The gold miner ETF rallied 9% for the session and was actually in the red before the Fed announcement.
Trading activity in GDX recently has been “dead on in terms of direction,” says Paul Weisbruch at ETF liquidity provider Street One Financial. For example, the fund saw inflows of $500 million earlier this week before Wednesday’s big rally. There was also an increase in call option activity before the Fed announcement, he added.
NUGT is a 300% leveraged ETF for the sector. The fund saw record trading volume on Wednesday and rallied nearly 28%. DUST is the bearish counterpart and experienced the second-highest volume day in its history on Wednesday. [Gold Miner ETFs: ‘Raging Bulls and Raving Bears’]
Market Vectors Junior Gold Miners (GDXJ) is an unleveraged ETF for small-cap stocks.
Gold miners are trying to recover after several years of horrible performance. For example, GDX posted negative returns in 2011 and 2012. Also, the fund is still down more than 40% year to date despite the bounce since late June.
Technical analysts are watching a reverse head-and-shoulders formation in GDX. It’s a bullish reversal pattern.
Market Vectors Gold Miners
Full disclosure: Tom Lydon’s clients own NUGT.
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