As gold prices continue to rise on a weak dollar and fears of inflation, ETF provider Market Vectors introduced a new way to play the commodity.
The new ETF, the Market Vectors Junior Gold Miners ETF (GDXJ), is constructed to track a basket of smaller gold mining companies. The Market Vectors Junior Gold Miners Index, which GDXJ seeks to replicate, provides global exposure to small and mid-capitalization companies that generate at least 50% of their revenue from gold and silver mining. A requirement for companies that are included in the index is that they must hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.
As of now, the top holdings in the fund include Coeur d’ Alene Mines (CDE), New Gold (NGD) and Silver Standard Resources (SSRI). These are small mining firms, and some, like Silver Standard Resources, are still in the development stage which increases the risks involved with investing in GDXJ. Additionally, lower trading volume and liquidity issues will likely add to the volatility of this new ETF.
In and of itself, GDXJ was launched at a good time by an ETF provider that is no stranger to the market. After all, the Market Vectors Gold Miners ETF (GDX), which tracks much larger gold mining companies, has been a success and boasts nearly $5 billion in assets.
