SIL Global X Silver Miners New

2013 was pretty rough for mining ETFs. A stronger dollar, the Fed’s QE taper concerns and overall demand-supply imbalance left the space in distress. And with the ongoing Fed tapering, though measured, mining ETFs might stay out of favor even this year.

This has made it difficult for mining ETFs to accumulate assets, as investors are opting for high potential sectors, a rebounding Europe, and to some extent, a fast-improving Japan.  Amid such a scenario, PureFunds’ decision to shut down 2 mining ETFs does not come as too much of a surprise (read: Metal Mining ETFs in Trouble?).

The funds to be closed – PureFunds ISE Diamond/Gemstone ETF (GEMS) and PureFunds ISE Mining Service ETF (MSXX) –entered the market in late November 2012.  The duo will trade for the last time on January 23, 2014.

Why the Closure?

Notably, GEMS and MSXX had the smallest share of assets of the commodity producers’ equities ETFs space. While the space bellwether Market Vectors Gold Miners ETF (GDX) boasts $4.3 billion in assets, GEMS and MSXX accumulated only $1.1 million and $0.8 million of assets, respectively. Such poor asset bases even after a year of launch suggests that the funds never took off in that sense.

This clearly explains why PureFunds chose to abandon these funds. With these closures, PureFunds will have only one ETF – PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF (SILJ) – trading in the mining space, that too with low assets under management.

Bottom Line

However, investors need not be bogged down by these closures. Many other mining ETFs still seem to have a bullish future. Though demand for hard assets will likely be low in 2013, Market Vectors Gold Miners ETF (GDX) has still managed to gather a huge asset base of $4.3 billion. GDX has returned about 10% so far in 2014, though it was a disastrous pick in 2013 (read: Gold or Bitcoins: Which Will Perform Better in 2014?).

Many are hoping that after such a horrible 2013, ETFs related to the yellow metal might be worthy of slight revival.  Especially for investors seeking to invest in gold mining ETFs with a long-term view, the ongoing low valuation might open up buying options. 

Also, silver mining ETFs like Global X Silver Miners ETF (SIL) and PureFunds’ SILJ have gained considerably to start 2014, suggesting there might be some hope for this space in the months ahead, at least for investors willing to fight through some serious volatility first (read: 3 Mining ETFs Finally on the Upswing). 

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MKT VEC-GOLD MI (GDX): ETF Research Reports
 
PF ISE-DIAMOND (GEMS): ETF Research Reports
 
PF ISE-MIN SVC (MSXX): ETF Research Reports
 
GLBL-X SILVER (SIL): ETF Research Reports
 
PF ISE-JS SC ME (SILJ): ETF Research Reports
 
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