Is the Gold Mining ETF Slump Over?

Zacks

Despite the global worries of a further slump in commodity prices going forward, gold managed to finish a little higher last week, adding a few percentage points. This has pushed the precious metal above the $1,450/oz mark again thanks to bleak US growth data that raised hopes of the Fed keeping the current pace of bond purchase intact this year (read: Have We Seen the Bottom in Gold ETFs?).

This increase has also being felt in the ETF space with key products like GLD, IAU and SGOL adding similar percentages last week. While these performances have been good, events have been even better in the gold mining ETF space.

Products in this category generally trade as a leveraged play on the underlying commodities, so when gold prices are rising, these mining ETFs are truly the winners. 

In fact, the gold miner ETFs outpaced the broad market funds like SPY by a wide margin in the same timeframe. This is because revenues for gold mining companies are based on the prices of gold as these do not hedge their entire production.

The firms in the mining space are undertaking various steps to reverse their longer term trend of underperformance. These include managerial changes, cost cutting programs and increasing dividends (read: Gold Mining ETF Slump Continues).

Gold Miner ETFs in Focus

In this backdrop, we have highlighted a couple of the biggest precious metal mining ETF winners for investors looking for some of the short-term beneficiaries of the recent surge in gold prices (see more ETFs in the Zacks ETF Center):

Global X Gold Explorers ETF (GLDX)

This is by far one of the largest and actively traded funds in the mining space. The fund seeks to match the performance and yield of the Solactive Global Gold Explorers index, before fees and expenses. The stocks in the index comprise liquid international stocks involved in gold exploration.

The ETF has managed assets worth $29.9 million since its launch in November of 2010. It is widely spread across 20 small cap securities with none of them holding more than 6.4% of assets. Atac Resources, Lyndian International and Rubicon Mineral occupy the top three positions in the basket (read: The Guide to Broad Metals and Mining ETFs).

In terms of country exposure, Canada takes the top spot with 92.3% share, followed by United States (4.2%) and Australia (3.5%). The product added over 4% over the last week and yields higher at 8.55% in annual dividends. It has a relatively tight bid/ask spread given volumes of more than 100,000 shares per day and charges 65 bps in annual fees.

Global X Pure Gold Miners ETF (GGGG)

This fund tracks the Solactive Global Pure Gold Miners index, which measures the performance of the largest and most liquid gold mining companies globally. The product has amassed only $3.1 million in its asset base and is less liquid trading in a paltry volume of roughly 4,000 shares while charging a fee of 59 bps.

With holdings of 24 securities, the product is diversified across each asset class with 47% allocated to small caps, 39% to mid caps and the rest to large caps. It does not put more than 6% of its assets in a particular firm. The top three holdings include Polyus Gold, Alamos Gold and Randgold Resources.

The ETF has a tilt towards Canadian firms with more than two-fifths share in the basket while South African and United Kingdom often get double-digit allocations with 14% and 10%, respectively. GGGG was clearly the top performer in the gold mining space last week, gaining over 7% in the same timeframe (read: Time to Buy this Precious Metal ETF?). 

Market Vectors Junior Gold Miners ETF (GDXJ)

Launched in Nov 2009, this popular ETF looks to focus on the small and mid cap firms in the gold and silver mining industry. It does so by tracking the price and yield performance of the Market Vectors Junior Gold Miners Index as closely as possible.

In total, the ETF has 78 securities in its basket with 86% going to mid caps and the rest to small, giving the fund a weighted average market cap of $1.8 billion. The fund charges investors 54 bps a year, and has incredible volume of over 3.6 million shares a day.

In terms of holdings, Canada dominates at 58.1% of total assets followed by a hefty Australia weight of just under 25%. It should also be noted that the fund does a great job of spreading out assets with no one firm accounting for more than 4.2%. Argonaut Gold, Torex Gold Resources and China Gold are the top three elements in the fund’s portfolio.

The ETF gained 4.08% in the past week and pays an attractive dividend yield of 5.82%.

Global X Junior Miners ETF (JUNR)

This is the newest product in the space, initiated by Global X in Sep 2012 (read: Global X Debuts Junior Miners ETF (JUNR)). The ETF looks to give broad exposure to small cap firms in the mining world from across the globe.

The fund seeks to match the performance of the Solactive Global Junior Miners Index, which is a benchmark of small cap mining firms that are engaged in producing, smelting or refining of coal, copper, gold, iron, nickel, silver, titanium.

The product holds 94 securities in the basket and is highly diversified across individual securities, sectors and countries. Each security holds less than 3.5% of the assets, suggesting minimal company-specific risk and prevention of heavy concentration. 

Precious metals enjoy the top position in the basket comprising roughly half of the assets. The rest goes to broad metals and minerals, coal and alternative energy, steel and aluminum.

In terms of a national breakdown, Canada and Australia take the top two spots with 36% and 28% of assets, respectively. The U.S. (18%), the UK (5%), and China (3%) round out the top five, suggesting that a host of nations from around the globe receive sizable chunks in the portfolio.

Thanks to the newness of the product, it trades in small volumes of nearly 10,600 shares per day and has amassed $2.9 million in AUM. This illiquid nature raises the cost for this fund in the form of a wide bid/ask spread beyond the expense ratio of 0.69%. The ETF has, however, added a solid 6.11% last week and pays an above-market dividend of 17.70% (read: 3 High Yield ETFs for Your IRA).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Read the analyst report on GLD

Read the analyst report on IAU

Read the analyst report on GLDX

Read the analyst report on GGGG

Read the analyst report on GDXJ

Read the analyst report on GDX

Read the analyst report on JUNR

Zacks Investment Research


 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

More From Zacks.com

Rates

View Comments (0)

Recommended for You

  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • Only 4 states will see cuts to food stamps

    Cuts to the nation's food stamp program enacted this year are only affecting four states, far from the sweeping overhaul that Republicans had pushed, an Associated Press review has found. As a result, it's unclear whether the law will realize the estimated $8.6 billion in savings over 10 years that…

    Associated Press
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance40 mins ago
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Best Womens Wrinkle Creams 2014

    Mom reveals simple wrinkle solution that has researchers very excited. Try this free solution today to look and feel years younger.

    AdChoicesBellaLabs.comSponsored
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Gold loses luster on Fed; Barclays cuts forecast

    Barclays cuts gold forecasts, sees increasingly bearish backdrop Bloomberg MA MB MC MD ME SAN FRANCISCO (MarketWatch) — Gold prices dipped Wednesday on concerns about a stronger dollar ahead of the Federal Reserve policy statement and in response to Barclays lowering its gold forecast.

    MarketWatch
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

    Reuters
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Tired of Living Paycheck to Paycheck?

    New website reveals how to save $1,000's when you're living paycheck to paycheck. See exactly how.

    AdChoices Media ForceSponsored
  • Boeing may have outfoxed Musk, but it could have bigger problems

    Elon Musk is arguably one of the greatest entrepreneurial minds of the 21st Century, but he was outsized an old school aerospace giant. Boeing won the bulk of NASA’s contract for a space taxi.  One of the other companies vying for the deal is SpaceX, the company headed by Tesla’s Musk, will get a…

    Talking Numbers
  • Fed renews zero rate pledge, but hints at steeper rate hike path

    The Federal Reserve on Wednesday renewed its pledge to keep interest rates near zero for a "considerable time," but also indicated it could raise borrowing costs faster than expected when it starts moving. In a statement after a two-day meeting of its policy-setting Federal Open Market Committee,…

    Reuters
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Romney-Sized IRAs Scrutinized as Government Studies Taxes

    The preliminary report attaches data to an issue that drew attention during the 2012 presidential campaign, when Republican nominee Mitt Romney reported an IRA worth $20 million to $102 million. Senate Finance Committee Chairman Ron Wyden said many of these "massive" accounts come from deals…

    Bloomberg
  • Russian billionaire placed under house arrest

    A billionaire Russian tycoon was placed under house arrest Tuesday in a money-laundering case that has drawn comparisons with a government crackdown on Russia's Yukos oil company more than a decade ago. The Investigative Committee, Russia's top investigative agency, said that Vladimir Yevtushenkov,…

    Associated Press
  • The Government Keeps Helping People Buy Failing Cold Stone Creamerys

    Would you loan someone money to buy a Cold Stone Creamery franchise if you knew that more than a quarter of those loans default? Over the last decade, franchisees in the Cold Stone Creamery ice cream chain defaulted on 29 percent of working-capital loans backed by the government, costing taxpayers…

    BusinessWeek
  • The New 2015 Sonata®: A Step Above the Competition

    There's a Sonata® that's perfect for you, and this is your chance to build it! Visit the Hyundai® Official Site to customize your 2015 Sonata® today!

    AdChoicesHyundaiSponsored
  • Facebook Is Hiding Important Information From Investors

    Facebook Is Hiding Important Information From Investors Facebook.com/sheryl On July 23, when Facebook reported its earnings for the second quarter, the company stunned everyone. Revenues were $2.68 billion, up 67% from the same quarter during the year

    Business Insider