Precious Metal Mining ETFs: a benchmark

The 2013 cyclical gold bear market and the crash of precious metal mining stocks leaves investors shattered. Some have been lured in again during the early 2014 recovery, while others are waiting to get their toes wet. A few mining analysts left the scene, while many saw their audience dwindle. Investors with limited funds and/or time for a due diligence study may gain exposure to the precious metal mining sector through purchasing one of the exchange traded funds (ETF's).

Benchmark of Precious Metal Mining ETFs

A first glance: year-to-date graphs of :

1. GDX, Van Eck's large-cap Gold Mining ETF,
2. GDXJ, Van Eck's junior Gold Mining ETF,
3. SIL, the Global X Silver Mining ETF,
4. GLDX, the Global X Gold Explorer ETF.

Gold explorers have a long way to go

Several gold explorers have popped and some have doubled (or even more). Does this mean the best days already are behind us? Not quite. If some gold explorers put down a stellar rally over the last few weeks, this mainly is some recovery after the dire malperformance during the preceding months, when explorers were sliced and diced, leaving investors with a couple of dimes on the dollar.

No mercy for gold explorers

A gold explorer ETF

Early October 2011, I pointed to the poor performance of junior gold stocks and of explorers in particular. With GLDX, the Global X Gold Explorer ETF, we have a suitable benchmark for that market segment. How has the situation evolved ever since? Let's first have a look at the GLDX graph since October 2011:

Global X gold explorer ETF (GLDX) the last 9 months

Doesn't look very nice, but then again: miners have been in a terrible slump, largely underperforming gold bullion over more than a year now. Are you off worse with explorers, as was the case in October?
We did witness a recovery of GLDX early 2012 and after the mid May disastreous swoon, a swift recovery followed. Yamana Gold bidding for Extorre added some spice to the rally. (GLDX has Extorre among its holdings; but on the flip side Yamana will acquire Extorre on the cheap as compared to what it quoted like a year ago).

Miners' performance relative to precious metals

Abstract
The focus of this article is on the gold and silver miners from a tactical point of view: how do PM miners perform relative to the price of gold or silver. Data used are 2012 Jan 10.
Special attention is paid to the miners covered by the database 'Canadian gold and silver mining', for which a capital weighted index of gold- and silver miners is calculated. Aggregated performance is one thing, it's also very illustrative that miner and explorer performance has been diverging from outperforming the metals by a wide margin to losing ground completely.

Junior gold miners and explorers lagging majors

On the gold miner pulse page of this blog, I have been pointing to the dramatic underperformance of juniors in the brutal miners swoon caused by the recent severe gold correction.

Since early April, junior miners ceased to outperform mining majors. Juniors nor majors were able to keep up with the pace of the gold price rising during summer. Whereas miners withstood a first pull back of the gold price rather well, the correction in the second half of September turned out to be dramatic. Junior miners and explorers paid a high price and much of their advantage over major miners is melting away. 

Junior miner performance on that blog page is measured using the MVGDXJ index. That index is going back to end Dec-2003 and offers a relatively long perspective when compared to the GDXJ Etf itself.

GLDX: the proof of the pudding is in the eating

An earlier posting: “GDXJ or GLDX, what to choose in the Gold Exploring Realm?” has been focussing on the differences in approach and ‘investing universe’ between the two ETF’s.

As GLDX now has a track record of over six months, I wish to discuss how this ETF started off its carreer on the stock market.

In spite of the early May precious metal correction, with silver kicked out off its parabolic ascent, both silver and gold are still considerably higher than six months ago, just after GLDX had been launched.

GDXJ or GLDX, what to choose in the Gold Exploring Realm?

Note: the ticker of the Global-X Gold Explorer ETF has changed to GOEX in 2016.