Gold stock ETFs are all in negative territory for the year while physical gold ETFs have gained over 6%. Although gold stock ETFs started 2012 strong, the falling price of gold has especially taken its toll on this group over the last month. Here's a snapshot of the performance grid sorted by year to date performance of all gold stock ETFs from GoldETFs.biz.
The best performing gold stock ETF this year is the volatile Market Vectors Junior Gold Miners ETF (GDXJ). After a rough 2011, GDXJ has rebounded to outperform all other ETFs in its peer group. This includes the most popular gold stock ETF, the large cap focused GDX. Still, with negative year to date returns and underperformance versus physical gold ETFs, the win for GDXJ is a bit hollow.
Recently gold prices have declined due to fleeting hopes of a QE3 and other factors including demand concerns out of China and India. Gold stocks have suffered more than physical gold, experiencing a close to continuous meltdown over the last month. Here's the chart displaying all gold stock ETFs, except RING as it isn't available on the stockcharts.com system yet, since the beginning of the meltdown on February 28th.
Adding further insult to injury, GLD the largest physical gold ETF, has predictably held up better since February 28th. Here's a bar chart illustrating the difference between physical and stock based gold ETFs during that period.
As gold stocks continue their slide, the sentiment on gold investing seems to be solidly in favor of physical gold versus gold stocks. Gold stocks have become more unpredictable in their relationship to gold of late and the recent disconnect appears likely to continue. Here's a three year chart of GDX versus GLD, from stockcharts.com.
Gold stock ETFs will continue to be an indirect way to invest in gold. These more volatile alternatives to physical gold ETFs appear to be on rocky ground when calculating their movements in relation to the price of gold. While the performance of gold stock ETFs lags physical gold ETFs at the close of the first quarter, the possibility of a gold price rally later in the year could set up gold stock ETFs to reverse course and finish 2012 as the leading gold ETF segment. Should gold prices continue their recent decline however, gold stock ETFs appear to be poised for a bigger meltdown.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Christian Magoon is the publisher of GoldETFs.biz.