Something extraordinarily good for junior precious metals miners just happened. But for some reason it’s being misinterpreted as a bad thing. Here’s the general story:

A Small-Cap Gold Mining ETF Streaks Lower As Big Index Change Looms

(Investors.com) – Mining stocks blazed a bright trail of returns since the start of 2016 as gold saw a renaissance and geopolitical uncertainties rose. That popularity has been double-edged for one gold mining ETF, which is now streaking lower.

VanEck Vectors Junior Gold Miners (GDXJ) is set for a major revamp of the underlying index, which will broaden the exchange traded fund’s market-cap range and raise the average size of its stocks.

Torrid asset growth has led to concerns that GDXJ is too big for its index, with massive stakes in some stock holdings making the overhaul necessary, as ETF.com first reported.

For investors in this popular and heavily traded ETF, the changes may mean less small-cap exposure than they have come to expect.

Under the new indexing method, the ETF’s largest company by market cap could be $2.9 billion — vs. $1.8 billion under the current method — putting it over the traditional $2.5 billion limit for small caps.

The index change is set to take effect June 17, but the Junior Gold Miners ETF already has started buying stocks not in the underlying index.

The new names include Alamos Gold (AGI), B2Gold (BTG), Iamgold (IAG), Pretium Resources (PVG), Real Gold Mining and Patagonia Gold, besides a hefty stake in its large-cap sibling, VanEck Vectors Gold Miners (GDX).

They now constitute the ETF’s top holdings and account for more than a quarter of portfolio assets combined.

Asset Haul
Assets in GDXJ have ballooned 270% from $1.3 billion at the start of 2016, making it a $5 billion ETF “attempting to invest in (an approximately) 30 billion gold universe,” as one analyst told ETF.com. As money flowed in, GDXJ ended up owning more than 18% of some Canadian stocks.

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