Gold Miner ETFs Soar Despite Collapsed African Barrick Talks
Shares of the $8.5 billion Market Vectors Gold Miners ETF (NYSE: GDX) are trading higher by more than two percent today despite news that a Chinese buyer is stepping away from talks to possibly acquire a controlling interest in African Barrick Gold.
African Barrick is publicly traded unit of mining giant Barrick Gold (NYSE: ABX), GDX’s largest constituent with a weight of 12.1 percent. Shares of Barrick are also higher by more than two percent despite news of the collapsed African Barrick talks. China National Gold Group and Barrick could not agree on a price for a 73.9 percent stake in African Barrick, the Wall Street Journal reported.
Perhaps surprisingly, Barrick and GDX have fought off those headlines to move higher. Despite gold futures moving higher in 2012 for a twelfth consecutive year, GDX plunged about 14 percent.
Even with today’s move, investors seem to be split regarding the near-term fate for GDX and related ETFs. In a research note published today, Street One Financial Vice President Paul Weisbruch says that more than $400 million in assets have departed GDX over the past week.
Conversely, Weisbruch also says recent call options activity in GDX and its small-cap equivalent, the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ), has been above average.
The Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT) is another ETF that is getting on the good times for gold miners today. NUGT, the triple-leveraged equivalent of GDX, is soaring by almost 6.3 percent in what is looking one of the ETF’s best days in months. Over the past year, NUGT has plunged nearly 56 percent.
“NUGT and GDXJ have seen net creations recently, but not of notable asset size. The Miners have lagged broad based equity benchmarks terribly in the trailing one and five year periods, so investors in that space are likely looking for a lift of off recent lows,” said Weisbruch.
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