The Huge Love Affair With The Miners

  • Go figure: The Market Vectors Gold Miners ETF (GDX) has now slid ~55% YTD to a five-year low, yet the fund has nearly doubled in size to $6.8B, as investors have added ~$2.5B despite the dismal performance.
  • With stocks at record highs, miners may look relatively cheap vs. other sectors, and funds like $GDX and $GDXJ appeal to many institutional investors who turn to miner equities as their favorite proxy for gold; indeed, the SPDR Gold Trust has lost $23B-plus YTD in assets under management.
  • But demand for gold miner funds isn’t always tied to value investors or long-term buy-and-hold types: Direxion Daily Gold Miners Bull 3X Shares ($NUGT) has attracted net asset inflows of more than $1.3B despite a difficult year for returns, while the bearish counterpart fund ($DUST) has seen YTD net outflows despite gains of ~200%.–Seeking Alpha

Based on this information one can argue that the miners have a long way to go before they form a true bottom if one believes that bottoms are formed when there’s despair.  That does not mean that they won’t have sharp rallies every now and then but its obvious that there is a very big love affair with the miners even though they have done nothing but disappoint.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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