Dion's Weekly ETF Blog Wrap

NEW YORK (TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next. Among his blogs this week were the following, in which he wrote about Van Eck's new gold miner ETF, a negative development for networking ETFs and the asset that would benefit from an appreciating Chinese currency.

Van Eck ETF Captures Golden Moment

Posted 11/11/2009 6:31 a.m. EST

Great timing. Traders and investors will be able to buy Van Eck's Market Vectors Junior Gold Miners ETF (GDXJ) at the open, just days after gold crossed $1,100 an ounce.

This fund will be very popular, and it will be interesting to see how the junior miners behave, but I'm even more interested in the network effects.

During speculative periods, an increase in the supply of an asset often allows greater participation. The junior miners ETF will grab headlines, but will it increase the interest in Market Vectors Gold Miners(GDX Quote) and bullion funds such as iShares Comex Gold(IAU Quote), SPDR Gold Shares(GLD Quote) and ETFS Gold(SGOL Quote)?

For investors concerned about investing in small-caps, I wrote this about the junior miners ETF: "While the underlying components in the Junior Miners portfolio have small market-caps, they have high trading volumes. Creation of the Junior Miners ETF, done in blocks of 50,000 shares, will likely not impact the trading of the underlying stocks."

Still, GDX is riskier than bullion funds such as IAU, and GDXJ is riskier than GDX. GDXJ will often gain more and lose more than GDX, and it may sometimes correlate to stocks more than it correlates to gold. This ETF is appropriate as a speculative position in a portfolio, but I wouldn't buy shares here given the recent run-up in gold stocks. Investors who don't even own GDX or a bullion ETF would do better to start there, but again, I'd wait for a pullback.

At the time of publication, Dion owned GDX and IAU.

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