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Choppy seas in equities have been good for gold—and gold miners.
On Wednesday, the gold price hit a 10-month high of $1,346.80/ounce, as investors sought a safe-haven hedge against geopolitical uncertainty and rising interest rates.
But rising gold prices aren’t just good for holders of bullion. They also spell good news for the miners bringing the precious metal out of the ground, who benefit from increased profitability and higher operating leverage.
Several gold miner ETFs have topped our best performers’ list over the last 30 days , including the Sprott Junior Gold Miners ETF (SGDJ), up 21% over the past month; the ETFMG Prime Junior Silver ETF (SILJ), up 19%; and the VanEck Vectors Junior Gold Miners ETF (GDXJ), up 17%.
But we think the most interesting action this week happened in the $11 billion VanEck Vectors Gold Miners ETF (GDX).
High Volumes For A High Vol Fund
The fund—which is by far the largest gold miners ETF and one of the largest ETFs, period—saw trading volumes spike on Tuesday, with about $2 billion worth of shares exchanging hands in one day, Bloomberg reported.
That’s more than twice the ETF’s usual daily volume, and more than any other fund had traded that day.
However, GDX is no stranger to high trading volumes. The fund, which tracks an index of global gold and other precious metals miners, is one of the most well-traded ETFs around, with deep primary and secondary liquidity and a vibrant options market. On average, the fund trades more than 42 million shares daily. (Read: “15 Most Actively Traded ETFs.”)
Over the past month, GDX has risen 15%. While that’s a solid rise, it’s less than the jump seen by the junior miner ETFs listed above, in part because GDX tracks larger, so-called “major” miners that are less nimble than smaller, more volatile “junior” plays.
Intriguingly, though, over the same period GDX has seen outflows of $281 million. But over a one-year period GDX has brought in $2.8 billion in net inflows:
Source: ETF.com. Data as of Feb. 21, 2019.
M&A Activity Ramping Up?
GDX’s largest weightings are in Barrick Gold Corp (11%), Newmont Mining (NEM) (8%) and the Franco-Nevada Corp. (6%). More than half (58%) of the fund’s portfolio is in Canadian firms.
In recent months, there’s been a pick-up in M&A activity among gold miners, with Barrick Gold merging with Randgold Resources and Newmont Mining buying Goldcorp. That’s because many major gold miners are finding that M&A is an easier way to boost their balance sheet than by finding new, untapped reserves.
Only time will tell if rising gold prices will lure the majors back to the picks and shovels, however.
GDX costs 0.53%, making it the second cheapest gold miner ETF, after the iShares MSCI Global Gold Miners ETF (RING), which costs 0.39%.
Contact Lara Crigger at [email protected].
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