The mining sector has been on a downward spiral over the past few years on plunging commodity prices and weak global trends. Acting as leveraged plays on underlying metal prices, metal miners tend to experience huger losses than their bullion cousins in a slumping metal market.

In particular, a strong U.S. currency is making dollar-denominated assets more expensive for foreign investors, thereby dulling the appeal for these commodities. This will continue to remain a drag on the broader space this year, with the Fed on a gradual path of interest rates hike. Yet global uncertainty and heighted volatility have brought back the allure for metals, boosting their demand. In particular, two precious metals – gold and silver – have been rising on safe haven demand (read: Pain or Gain Ahead for Gold ETFs in 2016?).

This is especially true given that weak Chinese manufacturing data, which dropped for the tenth consecutive month in December and a falling yuan led to renewed concerns over the slowdown in the world's second largest economy and their global repercussions. In addition, escalating tensions in the Middle East between Saudi Arabia and Iran, the two largest oil-producing nations, and geopolitical unrest in North Korea have contributed to the nervousness across the globe.

As a result, many mining ETFs are spiking with the start of the New Year, suggesting that the worst may be over for the space. In fact, a few funds have gained in double digits or near over the past five trading days and could be excellent plays for investors seeking to ride this sudden move in the metal mining space even higher. Below, we have highlighted these in detail below:

iShares MSCI Global Gold Miners ETF (RING - ETF report) – Up 10.9%

This fund follows the MSCI ACWI Select Gold Miners Investable Market Index and holds 30 securities in its portfolio. The product is heavily concentrated on the top three firms – Goldcorp (GG), Newmont Mining (NEM) and Barrick Gold (ABX) – which combined to make up 28.5% of total assets. Canadian firms take the lion’s share at 53.9%, though South Africa (15.3%) and the U.S. (11.4%) round out the top three. RING is the cheapest choice in the gold mining space, charging just 0.39% in fees and expenses. The fund has been able to manage assets worth $52.1 million while it trades in good volume of more than 103,000 shares (read: How Well will Gold Mining ETFs Weather a Rate Hike?).
 
ALPS Sprott Junior Gold Miners ETF (SGDJ - ETF report) - Up 10.6%

SGDJ targets the small cap segment of the gold mining industry by tracking the Sprott Zacks Junior Gold Miners Index. The benchmark utilizes the factor-based methodology that seeks to emphasize companies with the strongest relative revenue growth and price momentum. In total, the fund holds a small basket of 36 stocks with the largest allocation to the top firm – Detour Gold (DGC) – at 9.2%. Other firms hold less than 8% of assets. In terms of country exposure, Canada takes the largest share at 64% while the U.S. receives just 13% of SGDJ. The fund has accumulated $25.6 million in AUM since its debut in March last year and sees a paltry volume of about 9,000 shares. Expense ratio came in at 0.57%.

Sprott Gold Miners ETF (SGDM - ETF report) – Up 10.3%

This fund follows the Sprott Zacks Gold Miners Index, holding 26 stocks in its basket. It is highly concentrated on the top three firms – Agnico Eagle Mines (AEM), Goldcorp and Franco-Nevada (FNV) – that collectively make up for 43.9% share. The product is skewed toward mid caps at 59% while the rest goes to small caps. Here again, Canada takes the top spot at 77% followed by 10% in U.S. The fund has amassed $108 million in its asset base and trades in a good volume of around 82,000 shares a day. It charges 57 bps in annual fees from investors. 

Global X Gold Explorers ETF (GLDX - ETF report) - Up 9.8%

The ETF provides global exposure to the basket of 23 small cap gold mining firms by tracking the Solactive Global Gold Explorers Index. The product is highly concentrated on the top firm – First Mining Finance – making up for 12.6% of total assets. Other firms hold less than 8.2% share in the basket. Canadian firms dominate the fund’s return at 82% followed by Australia and United Kingdom. The fund is unpopular and illiquid with AUM of $25.3 million and average daily volume of 39,000 shares. Expense ratio comes in at 0.65% (see: all the Material ETFs here).
 
Market Vectors Gold Mining ETF (GDX - ETF report) – Up 9%

This is the most popular and actively traded gold miner ETF with AUM of $4.7 billion and average daily volume of around 60.3 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 37 stocks in its basket with concentration of 52.8% on the top 10 firms. Canadian firms account for half of the portfolio while the U.S. (15.1%) and Australia (12.6%) round off the top three. The fund charges 53 bps in annual fees.

Bottom Line

The bullish trend for mining ETFs could continue in the weeks ahead, especially if China continues to rattle the global market and other economic or political headwinds compel investors to risk-off trading. Additionally, the Fed hinted at a gradual hike for this year that will keep the greenback firmer and in turn favor the miners, especially gold and silver.