For much of the past four years, gold miner ETFs have risen less than physical funds. In some ways that's not surprising, since returns of equity funds like the Market Vectors Gold Miners ETF (NYSEArca:GDX) correlate much less to the price of gold than the likes of GLD, which hold actual gold.
Since September 2008, SPDR Gold Shares (NYSEArca:GLD), the $74 billion bullion ETF, has returned 107.4 percent, or about three times as much as the SPDR S&P 500 ETF (NYSEArca:SPY).
An article in Barron's this week pointed to technical factors at play. First, the price of gold versus gold equity has been artificially high over the past few quarters and is now leveling back to a more "normal" ratio.
Another reason is that the gold mining industry has been quite inefficient, putting downward pressure on profit margins. The past few years have been marked with heavy expenditures, with relatively little new profit streams to show for it. For example, deep-level mining in South Africa has been plagued by safety issues, depleting ore quality, poor infrastructure and skill shortages. . .View Full Article