Van Eck Gold ETF Mines Volatility

NEW YORK (TheStreet) -- Van Eck is hoping for a repeat of its popular Market Vectors Gold Miners ETF(GDX Quote), an exchange traded fund that has about $5 billion in assets and trades more than 10 million shares a day, as the price of bullion breaks records.

Market Vectors Gold Miners ETF holds companies with proven reserves and revenue, such as Barrick Gold(ABX Quote), Gold Corp.(GG Quote) and Newmont Mining(NEM Quote).

In contrast, the new Market Vectors Junior Gold Miners ETF(GDXJ Quote) focuses on small-cap stocks. The crucial distinction between a junior miner and a big gorilla is that a smaller company may not have gold to mine, or meaningful revenue, just the promise of finding gold at a mine it has the rights to. It reminds me of the quote: "Show me a gold mine, and I'll show you a liar standing above a hole in the ground."

Not that these companies are lying. But it speaks to the potential risk in accessing junior mining companies. Some will hit it big, some will muddle on forever and some will wipe out one way or another.

In the new exchange traded fund, Canada is the largest allocation at 62%, followed by the U.S., with 21%, and Australia, at 11%. It's surprising that Australia doesn't account for more of the ETF or that South Africa takes up only 2.4%. Some of the larger holdings, such as Coeur D'Alene Mines(CDE Quote), at 6.6% of the fund, and Hecla Mining(HL Quote), with 5.2%, may be familiar to investors who follow the group. The junior miners ETF has 38 holdings.