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Amid Declines, Outflows Seen at Gold Mining ETF


Excluding a sharp August rally, it has been a brutal year for gold mining stocks and the ETFs that house them, but investors have stood by funds like the Market Vectors Gold Miners ETF (GDX) . GDX is the largest and most heavily traded gold mining ETF.

Even when accounting for Wednesday’s 1.75%, GDX is off 45% this year, but that has not led to outflows that most investors would associate with an ETF struggling the way GDX has been. GDX’s assets under management total has actually grown this year even as the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) rank among the worst outflow offenders.

Despite the price gyrations, GDX has net attracted about $1.3 billion in new assets via creation activity in recent days, and the fund now has an impressive asset base of about $7.7 billion, according to manager Market Vectors, a unit of Van Eck Global, wrote Paul Weisbruch of Street One Financial earlier this week. [Gold Miner ETF Scooping up Inflows]

The inflow story has changed for GDX. At least for this week. The ETF sported $7.4 billion in AUM as of Tuesday, according to Market Vectors data.

Investors have pulled cash from GDX even after Citigroup raised its price target on gold to $1,248 per ounce from $1,143, but that revision is still below where bullion currently resides. It is also price where some miners may not profitably be able to pull gold from the ground. Citi also raised its price target on Barrick Gold (ABX) to $22 from $20, its target on Goldcorp (GG) to $29 from $28 and its target on Kinross Gold (KGC) to $5.90 from $5.80. Citi made those calls on Monday. [It's All About Price for Mining ETFs]

Interestingly, outflows from GDX have been seen during a week in which the Denver Gold Forum is taking place. The forum gave some companies that line GDX’s roster a chance to address a critical concern for investors: Production costs. For example, Agnico-Eagle Miners (AEM) detailed “how it plans to reduce costs by $50 million this year, and $200 million in 2014, while limiting its exploration costs to about $50 million,” reports Ben Levisohn for Barron’s.

AuRico Gold (AUQ) and IAMGold (NYSE:IAM) also touched on the issues of costs and balance sheet improvements at the forum, indicating that gold miners may realize investors are skittish about costs with gold futures laboring around $1,300 an ounce. Those three stocks combine for about 6% of GDX’s weight. [Gold's Bounce Inches Some Miners Back to Profitability]

Market Vectors Gold Miners ETF

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.