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ETF Specialist

Fool's Gold?

After three consecutive years of negative returns, it might be gold miners' time to shine.

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 Market Vectors Gold Miners ETF (GDX) came strong out of the gate in 2014, after posting three consecutive years of negative returns--declining nearly 66% in aggregate from 2011 through 2013. Is it finally gold miners' time to shine? With a current price/fair value ratio of 0.83, GDX is currently the cheapest of all of the exchange-traded funds for which we calculate this metric. But is there real value here, or are miners stocks just fools' gold? Here's the acid test on GDX.

Gold miners' failure to ride the gold bull market up has traditionally been blamed on the rise of physical gold ETFs, which supposedly drew away investors who had used mining stocks to obtain gold exposure. While there may a smidgen of truth to the story, it doesn't explain gold miners' continued weakness (markets are forward-looking) or the fact that miners underperformed gold even before the rise of ETFs.

Samuel Lee does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.