There has been a striking divergence in flows of goldbullion and gold equity ETFs (exchange traded funds).
Over the last two months, gold bullion ETFs have seen steadyoutflows, with bullion holdings falling 3.2%. Over the same period, gold equityETFs VanEck Vectors Gold Miners ETF (GDX) and VanEck Vectors Junior Gold MinersETF (GDXJ) have seen their share counts increase steadily by 19.8% and 10.2%, respectively.
Bullion ETFs vs.
VanEck Vectors Gold Miners ETF
We do not know what is causing the divergence. However, we suspect that it might be positioning by investors aware of the valuation discount in gold miners. Indeed, RBC Capital Markets calculates average price/cash flow for mid-tiers and majors of roughly 7x, compared to a long-term average of 11x.
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