DUST Direxion Daily Gold Miners Index Bear 2X Shares

Heading into this year, many investors were quite bearish on the gold mining market. This was for good reason too, as many investments in this space were hard hit in 2013 as the price of gold cratered, and growth equity picks were extremely popular.

However, a few weeks into 2014 has left investors wondering if this bearish case for gold miners will really hold. After all, many gold miners are easily outperforming the market in the year-to-date time frame, with double digit performances pretty common (see 3 ETFs to Watch for Big Moves This Year).

This is obviously a huge departure from the broad markets as the S&P 500 is down YTD, while gold, as represented by GLD, is sporting a roughly 4% gain for 2014. So clearly, at least with rising fear levels in the markets, investors are starting to once again pay attention to gold miners, which are finally outperforming once again after a very dark 2013.

Earnings

Major gold mining ETFs which represent a broad play on the industry were up roughly 3% in Monday trading, signaling a continuation of this bullish trend heading into the middle part of February. However, a slew of upcoming earnings reports look to either derail the gold miners, or send them soaring to new heights (see Inside 2013’s Best Gold ETF).

In particular, giants Barrick Gold Corp (ABX) and Goldcorp (GG) are both reporting this week and look to set the pace for the rest of the sector. Beyond these gold behemoths, investors also have companies like Novagold (NG), Agnico Eagle Mines (AEM), Kinross Gold (KGC) reporting at some point over the next few days suggesting it will be a make or break time for this space.

ETF Impact

These companies reporting look to greatly impact the large cap ETFs in the market, including funds such as the Market Vectors Gold Miners ETF (GDX), the PowerShares Global Gold and Precious Metals Portfolio (PSAU) and the iShares MSCI Global Gold Miners ETF (RING).

For PSAU, GG and ABX combine to make up close to 17% of the total assets, while GDX and RING lean even more heavily on Barrick and Goldcorp. In fact, 26% of GDX is devoted to ABX and GG, while 35% of RING goes to ABX and GG, showing how big of a week this is for these funds which are looking to continue their momentum following these key reports (see all the Materials ETFs here).

And beyond these large cap funds, investors should also be aware of the triple leveraged ETF market which looks to be in for an especially volatile week too. The triple daily bear fund, DUST, and the triple daily bull fund, NUGT, both have more than 26% of their portfolios in Barrick and Goldcorp as well.

These two funds have seen pretty insane performances already in 2014, and this week looks to continue the trend. DUST has lost more than 33% so far this year, while NUGT has added more than 33% (though it is still down roughly 90% in the past 52 weeks).

Mixed Bag Likely for Earnings

Currently, the mining-gold Zacks Industry has a pretty poor rank. The segment is ranked in the bottom 25% of all industries, suggesting a sluggish earnings estimate trend lately, and that a number of segments have seen better activity on this front.

However, the trend has started to become a bit more promising as of late, with several companies seeing an upgrade in their Zacks Ranks. In fact, the space has seen an increase in its industry rank of 26 places in just the past week, meaning it is slowly moving in the right direction and that there is at least some hope for solid earnings with the upcoming reports (also see 2 ETFs Riding High on Q4 Earnings Results).

Bottom Line

This looks to be a very important week for gold mining ETFs as a number of earnings reports could set the tone for the sector. This is especially true given the recent run in share prices for much of the space, as decent earnings—or at least a solid outlook—will be needed to keep this trend going.

So make sure to pay close attention to the gold mining ETF world over the next few days and weeks, as these coming sessions could really drive the segment and set the path for the near term in this important sector.

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BARRICK GOLD CP (ABX): Free Stock Analysis Report
 
DIR-D GM BR 3X (DUST): ETF Research Reports
 
MKT VEC-GOLD MI (GDX): ETF Research Reports
 
GOLDCORP INC (GG): Free Stock Analysis Report
 
DIR-D GM BL 3X (NUGT): ETF Research Reports
 
PWRSH-GLBL GOLD (PSAU): ETF Research Reports
 
ISHARS-M GL GLD (RING): ETF Research Reports
 
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