Gold Miner ETF Shines With Market Dreading a Slowdown

Gold Miner ETF Shines With Market Dreading a Slowdown

The Market Vectors Gold Miners ETF (GDX) is rallying as investors worry about growth and interest rates fall.

GDX is up about 2 percent since last Friday, making it one of the best-performing major exchange-traded funds (ETF).

The big move occurred on Wednesday after the Federal Reserve stunned markets by renouncing interest-rate increases for the rest of the year. That’s a pretty fast change from an institution committed to four hikes as recently as October.

Market Vectors Gold Miners (GDX), with 50-day moving average.

Market Vectors Gold Miners (GDX), with 50-day moving average.

Trouble overseas also hurt sentiment. President Trump kept a hard line on Chinese trade and indicated he’ll make sharper demands on Europe next. Separately, European manufacturing data showed activity slowing more than expected in the region.

News like that can help gold, which is often viewed as a safe haven. Precious metals also benefit from weaker growth because they’re an alternative to economically sensitive assets like equities.

Companies in the Market Vectors Fund

GDX focuses on the major companies producing gold. Its top holdings include:

  • Barrick Gold (GOLD): The Canadian company is the world’s top producer of the yellow metal.
  • Newmont Mining (NEM): A Colorado-based firm also operating in Australia, Africa and South America.
  • Newcrest Mining: Australia’s biggest player. It doesn’t trade in the U.S.
  • Franco-Nevada (FVN): The Canadian company collects royalties on properties rather than operating mines.
  • Wheaton Precious Metals (WPM): The largest “streaming company.” This is a kind of financing business that essentially lets WPM profit from gold and silver recovered at other types of mines, like those extracting copper and iron ore.

The most important catalyst impacting GDX is the underlying price of gold. Futures on the metal (@GC) could also have a a bullish triangle pattern, with a series of higher lows as they push against a key resistance line.

Investors interested in gold miners may want to know about these related funds:

  • SPDR Gold Trust (GLD): This ETF directly tracks the price of physical gold. Each share essentially controls one-tenth of an ounce.
  • Market Vectors Junior Gold Miners (GDXJ): This ETF holds smaller gold miners than those in GDX.
  • Direxion Daily Gold Miners 3X (NUGT): A highly leveraged trading vehicle that moves about triple the amount of GDX, in the same direction.
  • Direxion Daily Gold Miners 3X Bear (DUST): A highly leveraged trading vehicle that moves about triple the amount of GDX, in the opposite direction.

This post is the first in a regular “ETF of the week” series. It will focus on exchange-traded funds with interesting news or price changes.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.