NEW YORK (TheStreet) -- Although gold mining stocks are underperforming, analysts believe the long-term outlook is significantly higher.
Market Vectors Gold Miners ETF (GDX) has not risen as expected over the past few weeks while geopolitical risks have heightened, nonetheless, the index remains an appealing long term investment.
The companies most heavily weighted in the gold miners’ index are Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM), Silver Wheaton (SLW), Franco-Nevada (FNV).
READ MORE: Randgold Is the Gold Standard in Gold Mining, More Than Newmont or Barrick
The sudden convergence of various geopolitical narratives such as Argentina’s default, strife in Gaza, violence in Iraq, and Russia’s buildup of soldiers close to Ukraine’s border led many investors to believe that SPDR Gold Shares (GLD) would undoubtedly outperform other asset classes.
Gold, however, languished below resistance levels as investors instead fled to iShares Barclays 20+ Year Treasury Bond (TLT) and PowerShares DB US Dollar Index Bullish (UUP). Gold is priced in dollar terms, and is therefore weakened when the real value of the dollar increases.
Europe’s exposure to Russia and weakening economic fundamentals drove money out of both the region’s equity indexes, as well as its currency, CurrencyShares Euro Trust (FXE). This left investors searching for a safe-haven developed market, eventually fleeing in mass to U.S. assets.