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A Unique Precious Metals Exchange Traded Fund is Launched Under
a Cloud of Worry
By Andy Goldman
On May 22nd a new metals based Exchange Traded Fund began
trading on the Amex (GDX). The new Market Vectors - Gold Miners
ETF was launched by the Van Eck Global firm and trades under the
ticker symbol GDX. Those who follow the Exchange Traded Fund
Industry are likely to be aware of streetTRACKS Gold (GLD),
iShares Comex Gold Trust (IAU) and iShares Silver Trust (SLV).
All these funds have come into being with a great deal of
fanfare. This new fund which tracks the Gold Miners Index
happened to have been launched during one of the most
precipitous drops in precious metals prices seen in years. No
wonder why you may have missed its launch.
Its' downplayed launch was too bad, especially because the Gold
Miners ETF is the only one of its kind in the US. Though it is
related to the precious metals industry, it is much diferent
then the GLD, IAU, and SLV Funds, which are all based on the
prices of either silver or gold. This is a very narrow focus,
much
more like investing in commodities then in equities.
The Amex Gold Miners Index, is the first exchange-traded fund in
the U.S. offering investors exposure to the gold-mining equity
market, as opposed to just the metal itself. This is more broad
based for investors and is based on equities in the industry not
commodity prices. The new ETF may present more opportunities to
benefit from volatility, as mining-related shares tend to move
more dramatically than overall bullion. Another key difference
is that, unlike GLD, the GDX is optionable. The top ten holdings
in this new ETF are:
Newmont Mining 13.51 Barrick Gold 8.50 AngloGold Ashanti 7.51
Goldcorp 6.53 Gold Fields 6.50 Freeport-McMoran 6.16 Glamis
Gold 4.97 Harmony Gold 4.37 Kinross Gold 4.06 Buenaventura
3.72
With the recent downturn in and silver stocks , much of the
thunder was taken out of the launch of the GDX. This fund had
the unfortunate luck to be released for trading during a period
in which the precious metals have seen their greatest setback in
years. The most popular of the Gold ETF's streetTRACKS GLD has
been trading at a volume of 10 to 20 million shares for most of
May. The Gold Mining ETF, GDX, has traded at a volume of 200,000
to 600,000 shares in its first week. GDX, which is a broader
based fund then GLD, may have easily traded at a much higher
volume its first week, if it wasn't for a steep downturn in
precious metals.
The question now is it a good time to buy this new ETF? The Gold
Mining Index which this new Exchange Traded Fund is based on,
has just dropped from 1200 to 1000 in one week, a big drop for
an index of stocks. A bounce here is likely. There was a great
deal of speculation in gold. Even if this is the bottom, it will
take some time before Gold prices begin to recover from their
recent plunge. Keep a close eye on the trading volume for GDX to
see if institutional investors begin moving into this fund.
Andrew Goldman is president of Metal Rabbit media services, the
operator of http://www.Exchangetradedfundinvesting.com. He has
written a number of articles on finance and investment over the
last ten years.
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