New Junior Gold Mining Bear ETFs – Another Contrarian Signal?

A Case of “Excellent Timing” (?)

We still remember the flurry of ETF issuance in the tech sector that accompanied the final three months of the famous late 1999/early 2000 Nasdaq blow-off. The securities industry will always react to whatever trend is in fashion by offering products that are in line with it – and usually there is a concentration of such offerings right near the end of a trend. Since the gold market is relatively small – the entire gold industry’s market cap is probably only about a quarter of Apple’s market cap alone (this is just a rough back-of-the-envelope estimate, don’t hold us to it) – the appearance of two new Gold ETFs on the scene is worth noting.

According to press reports, ProShares has decided that now would be a good time to offer two new ETFs that will be short junior gold mines:

“Gold miners have been extremely volatile as of late, as gold prices have been punished the sector across the board. And since miners often trade as a leveraged play on the underlying metal, there have definitely been some big shifts in the miner ETF world recently.

Probably, sensing the bearish nerves of the junior gold mining space, ProShares proposed two bear ETFs in this zone. The duo comprises Short Junior Gold Miners ETF and Ultra Short Junior Gold Miners ETF.

Short Junior Gold Miners ETF looks to deliver the inverse results of its underlying  index and is rebalanced daily while Ultra Short Junior Gold Miners ETF seeks to offer the twice the opposite performance of the index. And to obtain the said objectives, the funds put their assets in derivatives and swap agreements.

These ETFs could be interesting picks for short-term traders who want to make a bearish bet on small cap gold miners. The vibes in the overall gold miners’ space is surely downbeat presently. Add to it the likely sooner-than-expected interest rate hike by the Fed as the U.S. economy has been gathering steam since Q2. This concern could further dampen the performance of gold mining stocks.

Further, the reiteration of 10% import duty on gold in the second largest consuming nation India and a prolonged slowdown in China continued to dampen the demand for bullion.  All these concerns should keep gold mining stocks under pressure making the latest proposals by ProShares extremely well timed.”

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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