Gold Miner ETFs Fail to Shine Despite Spectacular Earnings

by: Gary Gordon

A wide variety of gold miners served up sparkling Q2 reports during the recent earnings season. Newmont Mining posted a 34% year-over-year sales increase, and promptly raised its dividend. noted that precious metal miner Goldcorp (NYSE:GG) increased its net income over 2009’s 2nd quarter by 457%. Meanwhile, Canadian miner Kinross Gold (NYSE:KGC) posted 25% earnings per share growth.

In spite of what many regard as a banner season for precious metals mining, Market Vectors Gold Miners ETF (NYSEARCA:GDX) has been relatively weak. GDX is down-2.6% whereas non-precious metal commodity companies have offered actual percentage gains to investors.

Month-Over-Month Returns For Select Hard Asset ETFs/Resource Company ETFs (7/12/10-8/11/10)
Approx %
Market Vectors Agribusiness (NYSEARCA:MOO) 5.76%
Market Vectors Steel Index (NYSEARCA:SLX) 3.22%
Market Vectors Hard Asset Producers (NYSEARCA:HAP) 2.91%
SPDR Metals and Mining (NYSEARCA:XME) 1.20%
Claymore Global Timber (NYSEARCA:CUT) 1.12%
Claymore Global Water (NYSEARCA:CGW) 0.43%
Market Vectors Goldminers (GDX) -2.60%

Fans of gold’s potential remain undeterred, however. ETF Trends outlined a number of supply issues that could not only push gold prices higher, but send gold miner stocks through the stratosphere.

For instance, in the last two decades, new gold reserves have primarily been discovered in politically “risky” countries. This is akin to oil prices surging on Middle East uncertainty. Moreover, the millions of ounces in new gold that are discovered each year is down roughly 60% from 20 years ago. In brief, even if the global demand for gold remained steady, shocks to supply could boost profit margins for miners.

In spite of a rocky few months, Market Vectors Gold Miners ETF (GDX) remains in a long-term technical uptrend.

GDX 200

Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.