Funds Flowing Into Junior Gold Mining ETF, But Watch The Canadian Dollar

| About: VanEck Vectors (GDXJ)
This article is now exclusive for PRO subscribers.

I was taking a look at ETF fund flows at and noted something interesting about the Junior Gold Miners ETF (NYSEARCA:GDXJ) and its larger cousin the Gold Miner's ETF (NYSEARCA:GDX).

It seems as if money is flowing into these funds at a respectable clip. That's surprising considering that money is flowing out of many sector ETFs, including financials and emerging markets.

And as you might expect, money is flowing into some of the major treasury bond ETFs as investors take "risk off."

But take a look at fund flows into the gold mining ETFs as compared to some of those bond ETFs. Here's a chart that shows these flows on a one-month, quarter-to-date, and year-to-date basis:

And here's a similar chart, but showing fund flows as a percentage of the ETF's net asset value:

Viewed in these terms, GDXJ fund flows are quite positive, even compared to some of the bond funds, which investors are flocking into seeking some measure of safety (whatever that means these days)

GDXJ Underperformance: Look To The Canadian Dollar

While the Junior Gold Miners outperformed the larger miners into early 2011, the junior miners have underperformed over the last year as you can see here:

But I also ran into an interesting statistic on both funds and their currency exposure. Compare GDX to GDXJ:

Yes, the Canadian dollar represents 62% of GDXJ's currency exposure compared to 1% for GDX. With that in mind, you can see how that could impact performance of the junior miner ETF:

So if you're going to be investing in the GDXJ fund, watch the Canadian dollar. If it rises, it should take the junior miners with it.

Disclosure: I am long GDX.