Alternatives To Changing Gold Miner ETFs

April 20, 2017

Today GOEX is transitioning to an index of gold companies involved in exploration and limited levels of gold mine production. New constituents must have a market cap of at least $200 million. The largest holding currently has a market cap of $2.4 billion.

In terms of performance, GOEX is at the head of the pack in terms of year-to-date returns, with a gain of 15%, compared with 13.7% for GDXJ and 11% for SGDJ. Of course, past performance is no guarantee of future results, especially with all the index changes taking place.

YTD Returns For GDXJ, SGDJ, GOEX

Alternatives To Broken JNUG

Meanwhile, GDXJ isn't the only ETF that's facing the scrutiny of investors. Last week, creations for the Direxion Daily Gold Miners Index Bull 3x Shares (JNUG) were suspended indefinitely, raising concerns that the ETF could trade at a premium to its net asset value (NAV).

Currently, investors are paying more than a 1% premium above NAV to buy JNUG on the open market. For those who want to avoid the ETF until the creation/redemption mechanism is fully restored, there are three leveraged alternatives.

The first is the $2 billion Direxion Daily Gold Miners Index Bull 3x Shares (NUGT), which provides triple-leveraged exposure to the broad NYSE Arca Gold Miners Index (the same index tracked by the VanEck Vectors Gold Miners ETF (GDX). There's also the $14.7 million ProShares Ultra Gold Miners (GDXX), which provides 2x-leveraged exposure to the same NYSE Arca Gold Miners Index.

NUGT and GDXX both track an index that's weighted heavily in large-cap gold mining stocks. For smaller-cap, leveraged exposure, investors can consider the $6 million ProShares Ultra Junior Miners (GDJJ), which provides double the daily return of the MVIS Global Junior Gold Miners Index (the same index tracked by GDXJ and NUGT).

As always, tread carefully when buying and selling thinly traded ETFs, such as those mentioned in this article with less than $100 million in assets.

Contact Sumit Roy at [email protected]

 

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