Loading ...The big news lately is how awfully the junior miners are acting now that Van Eck (creators of the “GDXJ”) has been forced to stop buying junior gold stocks. You wonder why the juniors are now in a completely bifurcated market and all you need do is look at the names in the GDXJ that are considered the “anointed ones” while everyone else aspires to be lest they wind up as “orphans” (housed and fed but without sponsorship) or the “zombies” (no food, no shelter, reviled by all).
The bankers created the ETF’s to capture market share but more importantly, they created ETF’s to capture FEES and to corner the bid-ask spreads that allows them to take a haircut on every ETF transaction that occurs. Applying this line of thinking to the junior gold miners and explorers, back in the days before bankers took greed to a new level, the junior mining space had access to ample funds by way of the junior resource brokerage firms such as Canaccord (before the “wealth management” transformation), Yorkton, Haywood, Fraser Mackenzie, Union Securities, and Mackie.
Private investors would forge relationships with the resource broker and if he/she wanted to invest in the junior exploration sector, his/her only access would be through the open market or indirectly through a mutual fund or through private placements.
The conduit to the market was not guarded by a gatekeeper called IIROC until the banks decided to exert pressure and then once achieved , the big five Canadian banks squeezed the little firms out of business by creating the money-draining resource ETF’s run by ex-bankers whose billion dollar funds would inevitably find their way into the bank-led underwritings formerly the specialty of the smaller boutique brokers.
Watching the lag in junior miners despite a move over $1,290 in gold is painful but now you know why. The Van Eck GDXJ ETF is a $5 billion fund in a $35 billion junior mining market and there just aren’t enough names to go around. This is why I try to have a basket of my own juniors rather then the ones owned by the ETF’s because once you are in the GDXJ fund, you are slave to the macro trends and victim to the inevitable moment where you may get ejected from the fund and 18% plus of your issued capital is thrown on the market for sale. In fact, inclusion of your company into the GDXJ has been transformed into a “Sell Signal” because it is the second-greatest liquidity event in a company’s life, the first being a takeover by a major.
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As good as an explanation as this is, it does not deal with why the leverage ratio of stocks over metal has gone haywire. Stocks will normally move at anywhere from 3 to 10 to 1 against metal…in BOTH directions. Juniors way more….
Currently we are running 1 to 1 or less on the upside, but at the old rate on the downside.ystydy being a fine example….Hui down 3.6 %, Gold dn 0.9 % …4 to 1 !!!!!
So with the knowledge some lunatic is happy to dump 70 tonnes of Gold in a minute 2 days running, which can only be the scum…it looks safe to say that the scum have found a way of capping the miners gains and maximising losses….the GDX seller ????