Although the U.S. dollar has recently traded flat, commodities of all stripes are slumping, and that includes precious metals. Even gold has been wilting while the dollar dithers. For example, the SPDR Gold Shares (GLD) is off nearly 3 percent this week. With a few more bad days, GLD and rival gold exchange-traded funds (ETFs) could erase what is left of their year-to-date gains. Things are worse for gold miners ETFs, including the group's two largest – the VanEck Vectors Gold Miners ETF (GDX) and the VanEck Vectors Junior Gold Miners ETF (GDXJ).
Investors are taking notice and are scampering out of gold miners ETFs at a rapid pace. "Outflows have picked up a bit in the largest gold miner equity fund (GDX) this week, with more than $1 billion leaving the fund via redemption flows thus far," said Street One Financial Vice President Paul Weisbruch in a recent note. (See also: GDX: Market Vectors Gold Miners ETF.)
Investors are also fleeing GDXJ, the junior miners ETF. "GDXJ has also been pressured lately with some outflows ($370 million out). Both funds have fallen precipitously in recent sessions, and are under selling pressure again this morning (GDX trading at its lowest level since mid-March) on lower gold prices lately," adds Weisbruch. (See also: GDX versus GDXJ.)
Over the past month, GDX is off 10 percent, meaning the ETF is in correction territory. GDX, the largest gold miners ETF, is clinging to a year-to-date gain of less than 1 percent. As for GDXJ, that ETF's year-to-date performance is now dismal at a loss of 6 percent. With a loss of almost 20 percent over just the past month, the junior gold miners ETFs is close to entering a new bear market.
Losses for the miners ETFs far surpass those of gold-backed ETFs. GLD, the world's largest ETF backed by physical holdings of gold, is off just 2.4 percent over the past month. Investors are sticking by GLD, but the same cannot be said of GDX and GDXJ. Since the start of the second quarter, investors have allocated $869 million to GLD. However, outflows from GDX and GDXJ are $1.48 billion and $625.4 million, respectively.
"Interestingly, the U.S. dollar has been trading flat as of late, so we are not quite sure what to make of this recent sudden sell-off in gold and other precious metals, as silver for instance has not been spared in the past couple weeks either," said Weisbruch. The iShares Silver Trust (SLV), the largest silver ETF, is in the midst of a lengthy losing streak and is now in correction territory with a one-month loss of 11 percent.