After a dismal performance in 2013, precious metal funds, in particular gold ETFs, have been shining in recent sessions as the biggest asset gainers with a strong run up in their prices too. In fact, the yellow metal extended its rally and climbed to a three-month high last week on U.S. economic growth worries and strong demand (read: The Real Winner from the Precious Metal ETF Rally).
Currently, gold is trading above $1,300 per ounce with some forecasting a bigger increase in the days ahead. This is largely due to a rise in weekly jobless claims, unexpected drop in January U.S. retail sales, and a sharp decline in manufacturing activity that continued to weigh on the dollar and raised concerns on Fed tapering plans. This has resulted in a safe haven appeal across the board.
Additionally, emerging market weakness and signs of slowdown in the world’s second largest economy further boosted the demand for gold and the related ETFs.
With that being said, the ultra-popular SPDR Gold Trust ETF (GLD - ETF report), with an asset base of around $34.2 billion and average daily volume of about 8.5 million shares, pulled in more than $386 million in capital and rose over 4% last week. The fund tracks almost 100% the physical price of gold bullion measured in U.S. dollars, and is kept in London under the custody of HSBC Bank USA. GLD has a Zacks ETF Rank of 3 or ‘Hold’ rating.
The mining ETF counterpart – Market Vectors Junior Gold Miners ETF – accumulated nearly $104 million in assets, propelling the total base to $1.9 billion. GDXJ is a small cap centric fund and provides global exposure to 68 gold mining firms. Canadian firms take the lion’s share at 65.5%, though Australia (19.2%) and the U.S. (8.2%), round out the top three.
China Gold International Resources, Mcewen Mining and Semafo occupy the top three positions with 4% share each. The ETF charges 55 bps in fees per year and sees solid volume of nearly 1.6 million shares a day. The ETF was a top performing fund last week gaining nearly 14.4% (read: 3 Mining ETFs Crushing The Market in 2014).
Energy ETFs Failed to Impress
The energy ETFs space was struggling on lower oil prices led by waning demand and increasing global supplies. The feeble U.S. data of late made investors worry about sustained economic growth suggesting weaker demand for oil in the near term (see: all the energy ETFs here).
Further, crude oil inventories rose 3.3 million barrels in the week ending February 7, up from the market expectation of 2.7 million barrels, as per the U.S. Energy Information Administration. This soft inventory report weighed on oil prices. Moreover, though cold weather has boosted the demand for fuels like heating oil and natural gas, it forced Americans to stay at home thereby resulting in lower traveling and less use of gasoline.
As a result, many energy ETFs saw huge outflows last week with iShares U.S. Energy ETF (IYE - ETF report) leading the way. IYE lost nearly $636 million in capital, bringing its asset base to under $1.22 million. This ETF tracks the Dow Jones U.S. Oil & Gas Index, giving investors exposure to 85 energy stocks.
Exxon Mobil (XOM) and Chevron (CVX) occupy the top two positions in the basket and take the bigger chunk of assets at 22.17% and 12.01%, respectively. From a sector perspective, oil & gas producers make up for three-fourths share, while oil equipment services and distribution takes the remainder (read: Big Oil Earnings Drag Down Energy ETFs).
The product charges 45 bps in fees per year and trades in average daily volume of roughly 700,000 shares. Despite the outflows, the ETF was up about 1.8% last week.
Other energy ETFs – Energy Select SPDR (XLE - ETF report) and First Trust Energy AlphaDEX (FXN - ETF report) –shed $288 million and $268 million, respectively. All the three funds have a Zacks ETF Rank of 4 or ‘Sell’ rating, suggesting that investors should avoid these due to unfavorable macro environment and asset outflow trend, as these might catch up to the energy ETF space before long.
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