Daily ETF Roundup: GDX Soars On Gold’s Glitter, TVIX Loses Another 30%

by on March 23, 2012 | ETFs Mentioned:

What started off as a down day saw markets turn things around and hold tight to cap off the week. Despite today’s minimal gains, markets were forced to ink a down week, marking only the second time that has happened this year. The S&P 500 gained 0.3% but was unable to break through the 1,400 barrier that it lost hold of earlier in the week. Luckily, the Dow was able to gain roughly 34 points and keep from sinking below the coveted 13,000 line that it worked for so long to pass. The only major data point on the day came from new home sales, which disappointed, however, home prices were still high, leading to a mixed outlook from the indicator [see also UBS Launches Leveraged Real Estate ETN (RWXL)].

Commodities took over during the session, as gold was able to amass gains of nearly 20 points. The precious metal has been frustrating investors all year as it has failed to provide a similar performance to that of 2011 when it soared to historic highs and became a shining part of a number of portfolios. Crude oil also enjoyed a strong trading day, as the fossil fuel jumped by roughly 1.4%. With crude rising, the issue of high gas prices in the U.S. will only feel more pressure, as consumers demand lower prices at the pump. For now, we outline two of the most notable ETF performances on the day to keep investors up to date with the happenings around the financial world [see also 25 Ways To Invest In Crude Oil].

One of the biggest ETF winners on the day was the Market Vectors TR Gold Miners (GDX), which saw a healthy increase of approximately 2.1% on the day. GDX tracks the performance of gold mining equities, which are known to exhibit high beta scores, making them something of a leveraged play on the underlying metal, allowing GDX to gain more than gold for the day. The ETF is now up to $6.5 billion in total assets and is trading around 14 million shares each day [see also Three Reasons Why Gold Is Overvalued].

One of the biggest losers, for the second day running, was the Daily 2x VIX Short-Term ETN (TVIX) which surrendered a staggering 30%, again. That makes losses of roughly 60% in just two trading sessions, a nightmare for many traders. The losses were stemmed from not only a massive premium that has just about dryed up, but also from the announcement that creation of TVIX shares will soon be resumed, driving down prices. The volatile performance of this fund simply goes to show you that you should never invest in a fund that you do not fully understand; TVIX is  a powerful trading tool when utilized by the right minds, but investors who don’t do their homework could end up on the receiving end of its downfall. Note that if the fund dips below $5/share, it will likely have to reverse split [see also Low Volatility ETFs Attracting Big Inflows].

Disclosure: No positions at time of writing.