Over the last month stock based gold ETF products have swung from leaders to laggards in the gold ETF category. Negative Fed comments, recent rumblings of economic slowdowns from the two leading consumers of gold - China and India - as well as a flare up in the EU debt crisis have taken its toll on gold mining and exploration stocks. This ETF category is more volatile than physical gold ETFs and the beginning of 2012 saw the upside of that dynamic. Now the other side of the equation is happening.
Wednesday saw a 2% - 3% sell off in gold stock ETFs. Indeed, the last four weeks have seen the category lose almost 5% - 10% of their value with the two largest gold stock ETFs, GDX and GDXJ respectively down 5.7% and 9.9%. In contrast, physical gold ETFs are down around 3% over the last month and actually had a positive day on Wednesday. Here's the chart outlining the recent damage to gold stock ETFs.
click to enlarge
Physical gold ETF products have clearly held up better with GLD, the largest gold ETF in the world, down only 3.5% over the last month. In fact, every physical gold ETF is now outperforming every stock based gold ETF this year. IAU from iShares is the leading performer, gaining 7.8% for the year. Here's the recent performance chart below.
If gold goes into a broader correction, we are likely to see more downside in gold stock ETFs than their physical counterparts. This move could restore physical gold ETFs, 2011's gold ETF performance leader, to the top once again for 2012. However, if a downward move for gold sets up a run at $2000 an ounce later this year, gold stock ETFs might just have something up their sleeve.
Additional disclosure: Christian Magoon is publisher of GoldETFs.biz.