2012-02-07

ETF Demand for Junior Gold Miners

When the general public finally catches gold fever, the junior miners will outperform, a lot of money will flow into funds such as GDXJ, and those funds will help determine market prices.

Market Vectors Junior Gold Miners ETF (GDXJ) has $2.5 billion under management as of February 6, 2012. I compared the total market value of each holding against the market capitalization for each stock (third column), in addition to doing a static analysis of $1 billion flowing into GDXJ, as if $1 billion dropped out of the sky and could instantaneously buy shares at the February 6 closing prices. This is represented by the percentage of the market capitalization that would be acquired in each company (fourth column). I do not have market cap data for all stocks (from Yahoo), so a few are missing.

From a momentum point of view, the more funds that flow into GDXJ, the potentially greater the rise could be for the stocks most impacted. From a value perspective, the more funds that flow into GDXJ, the potentially more undervalued the less impacted stocks could become. I reiterate that this is static analysis. If one of the funds lower on the list has good news, it's share price could rise and then it would be a greater percentage of the fund (and vice versa). Therefore, the data has a limited time value.






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