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Digging Into Gold Mining ETF GDX

By  +Follow December 6, 2013 8:22AM
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A quick look at the most actively traded ETFs by average volume provides no surprise for the top name: the SPDR S&P 500 ($SPY) moves and average of 111 million shares a day. Coming in right behind it is the iShares MSCI Emerging Markets Index ETF (EEM) , also a predictable entry. However, some might be a touch surprised to see the ETF with the third-highest average daily volume: the Market Vectors Gold Miners ETF ($GDX).

While the majority of the ETFs traded the most actively are very broad, covering large swaths of the global economy, the GDX is much more specific, focusing entirely on one segment (gold) or one industry (mining). As such, GDX stands out for being an unusually narrow entry into the ETF category to attract so much attention.

Just Another Gold Play?

It’s not hard to see the main reason why GDX is so popular: gold. Gold bugs are notoriously voracious, and gold always seem to spark the imagination of investors across the globe. And, while gold investing usually takes the form of buying (or shorting) commodities and futures contracts, the GDX is a way to indirectly speculate on the price of gold while still using the familiar vehicle of an equities ETF. A quick comparison of gold spot prices and shares in GDX show that the value of GDX tends to mirror movements in the price of gold.

However, that’s not the whole story. Over the last year, movements in the spot price of gold are generally closely matched by shifts in GDX, but they tend to be magnified for GDX. And, taking it a step further, looking back of 5 years shows a pretty clear correlation between the two, but with the GDX showing considerably more independence. The GDX was more volatile while on the rise during 2009 and 2010, then fell much further when gold prices started their extended plunge in September of 2012. Over the last year, the price of gold lost about a quarter of its value, while GDX is off over 55 percent.

What’s in GDX?

So while investing in GDX is, in many ways, a proxy for investing in the price of gold, it’s not a perfect match. Mining stocks tend to experience swings in the price of gold more violently, rising higher and falling farther than the precious metal. They can also exhibit much greater volatility.

Anyone planning an investment into GDX should probably do their research, as a result. Because GDX is comprised of stocks in 37 different gold-mining companies, many of the fluctuations based on the situations of individual companies are evened out. However, that doesn’t mean that there aren’t a handful of major players that can greatly affect the ETF.

The GDX tracks the NYSE Arca Gold Miners Index. It has five different companies that consist of 5 percent of holdings or more. They are Goldcorp (GG) with 11.7 percent, Barrick Gold Corp. (ABX) with 10.56 percent, Newmont Mining Corp. (NEM) with 8.06 percent, Randgold Resources (GOLD) with 5.05 percent, and Yamana Gold (AUY) with 5 percent.

And Did You Say Dividend?

Perhaps one of the most important considerations, though, in investing in GDX instead of gold would be the ETF’s dividend yield currently sitting at just under 2.25 percent. Simply put, buying commodities or futures doesn’t pay a dividend. Owning gold means just that: you own gold. And that gold doesn’t care how you feel about any of it.

A gold mining company, though, has to treat you like it would any other shareholder. You own a piece of that company, and you share in its profits. As such, while you’re still susceptible to fluctuations in the price of gold, it’s a lot easier to hang onto a dividend stock through hard times than it is physical gold.

Gold Miner ETF is a Different Kind of Gold Play

Ultimately, like any mining stock ETF, GDX is tied tightly to the price of gold. However, that doesn’t mean that it’s simply another way to bet on the price of gold. The existence of a dividend, greater volatility, and a composition made up of several different companies each with their own individual circumstances makes GDX its own beast.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for gdx
Stock News Headlines
2 Sep 14 23:21:15
$GDX: Gold Miners ETF Inches Toward a Breakout http://t.co/27mQKnejcw http://t.co/xEpBWRoubJ
tunckar
2 Sep 14 23:05:39
George Soros Is Betting Against The Market And Why Investors Should Take Notice $SPY $DIA $QQQ $GLD $GDX http://t.co/dbcUrOzV2A
chartguy89
2 Sep 14 22:53:29
GDX +11.11% Stock Charts $GDX Goldex Resources Corp. (CVE) Last Updated: 09/03/2014 00:53:28 GDX Stock Chart - http://t.co/c4fteo91ui
Market Masta
2 Sep 14 22:41:48
be cautious $JDST. Looking for some repercussion.Not sure how strong the $USDX really is? $GDXJ $GDX http://t.co/yWR5LU5nXL
Sal
2 Sep 14 22:10:17
RT @EdwardGofsky: $GLD This would be the bearish Elliott Wave count on #gold 5th wave decline. $NUGT $DUST $GDX $SLV http://t.co/CVzQptS2Jr
Antonio Pedra
2 Sep 14 22:09:08
Metales Preciosos: El rebote, mas en entredicho que nunca http://t.co/69Et9DNtLw via @inBestia #oro #plata #ETF $IAU $SLV $GDX $GLD
Financial Headlines
2 Sep 14 21:21:14
$GDX: 3 Reasons Market Vectors Gold Miners ETF (GDX) Could Fall http://t.co/Kl8Zo50Bsb http://t.co/jttYfsRYSE
Option Bob
2 Sep 14 21:01:05
I believe the odds are increasing that we could see a massive move south in gold soon. Miners are even more vulnerable $GLD $GDX $DUST Very
Edward Gofsky
2 Sep 14 20:54:28
$GLD This would be the bearish Elliott Wave count on #gold 5th wave decline. $NUGT $DUST $GDX $SLV #stocks #charts http://t.co/7QuAO7g1lL
Edward Gofsky
2 Sep 14 20:36:05
$HGD.TO {Cup+Handle} setting up in this 2x bear gold stocks ETF. $GLD $NUGT $DUST $SLV $GDX #stocks #charts http://t.co/38IZPrwrq5
Option Bob
2 Sep 14 19:44:40
If gold can't catch a bid in overnight trading, I expect a way bigger move south soon. Price action is terrible. $DUST $GLD $GDX
Dale Brethauer
2 Sep 14 18:32:01
LIVE TRADE ANALYSIS (previous post but great content), Gold Miners $GDX returns 93.3% in 5 days. #trading #options http://t.co/lAvz3UaYwt …
Dawn Rinaldi
2 Sep 14 18:31:38
$USDX $GDX $DUST $FCX $GLD Japan & Draghi up this week more QE fx slamming? $$$ real strong wowza
Bay Lounge
2 Sep 14 17:30:00
Storonoway trades at a 90% discount to NAVPS $1.22. Read here: http://t.co/2EFUVM19dx $SWY.TO $MDM $ROG $ABX $NEM $AUY $GG $GDXJ $NUGT $GDX
Financial Headlines
2 Sep 14 16:21:16
$GDX: [video] Will tensions in Ukraine spark gold? http://t.co/P2TOBTdXtJ http://t.co/6hUFmtUHO1
The God of Trading
2 Sep 14 16:20:43
Suddenly #GoldStocks suck -- shorting $GDX $GG $RGLD $HL. #SwingTrading #Gold #PreciousMetals #MarketTiming http://t.co/jFjPKbFE0L
GoldMarketNews
2 Sep 14 16:17:13
#Gold Miners ETF GDX - last: $25.81 @ 4:00pm EST 9/2/2014 http://t.co/ASOqrLFpIN $GDX
Prices Gold
2 Sep 14 16:17:12
#Gold Miners ETF GDX - last: $25.81 @ 4:00pm EST 9/2/2014 http://t.co/gGOi5d8JYG $GDX
Pulsar Investments
2 Sep 14 15:57:56
A late comeback from the long weekend... Stocks are in normal sideways but treasuries $TLT, gold $GLD $GDX and oil $USO all break down!
GLDTrader
2 Sep 14 15:39:23
RT @ChartingStock: $GLD Support $121.43 $121.18 $120.57 $119.94..Resistance $122.08 Gap=$123.86 $124.22 $124.82 Manage Risk-More @GLDTrader…
ChartingStock
2 Sep 14 15:35:03
$GLD Support $121.43 $121.18 $120.57 $119.94..Resistance $122.08 Gap=$123.86 $124.22 $124.82 Manage Risk-More @GLDTrader $GOLD $GDX
Francois Germain
2 Sep 14 15:02:35
$GDX short entered on Friday @ close is looking good. Hope for some follow through this week. Vol is decent today!
The Gold Forecast
2 Sep 14 14:40:33
Never mind Russian tanks in Ukraine and idle threats against NATA by resurgent Russians. Never mind ISIS.. http://t.co/b0uiArt76S #gld $gdx
harv sethi
2 Sep 14 13:36:22
RT @SeekingAlpha: George Soros Is Betting Against The Market And Why Investors Should Take Notice http://t.co/qhmaIUy8eF $SPY $DIA $QQQ $GL…
Top ETF Funds
2 Sep 14 13:22:00
[video] How low can gold go?.. http://t.co/NmohVZw6os $GDX #ETF #ETFs #Stocks
Stock Rocket
2 Sep 14 13:21:16
$DGLY is up 940.2% in 3 weeks! Our new penny stock alerts are coming soon: http://t.co/G4xan5kQD5 $MDMT $COHO $GDX
Market News
2 Sep 14 13:21:13
$GDX: More Pain or Gain for the Miners? http://t.co/ZDt46T2Aq2 http://t.co/tVVhR7TbkG
GoldMarketNews
2 Sep 14 13:13:49
#Gold Miners ETF GDX - last: $25.87 @ 3:58pm EST 9/2/2014 http://t.co/aV5v53Mi0q $GDX
Prices Gold
2 Sep 14 13:13:39
#Gold Miners ETF GDX - last: $25.87 @ 3:58pm EST 9/2/2014 http://t.co/eFrEdx8Hw9 $GDX
provendirection
2 Sep 14 13:09:08
@TweetLeni doing anything with gold miners? $GDX
Carol Chen, CFA
2 Sep 14 13:08:34
$XAUUSD What a heart breaker! http://t.co/OKNr1Xv6Xs $GLD $GDXJ $GDX $NUGT
Kirk Kornegay
2 Sep 14 12:59:53
Wow miners are crashing! $GDXJ $GDX
Avida Capital
2 Sep 14 12:58:14
Nice setup so far on $NUGT. Moving in our favor 2 of 3 purchases in. Will be trading live tomorrow again! Avg 41.81. $GDX $JNUG $DUST
Hard Assets Investor
2 Sep 14 11:39:55
Miners Poised For M&A-Fueled Breakout Once Gold Recovers $GDX http://t.co/WzzUgKVLfQ
DNA Precious Metals
2 Sep 14 11:25:18
123tom: $GDX opens September....Down. http://t.co/N333nBRYmT
Miningfinance
2 Sep 14 11:25:12
123tom: $GDX opens September....Down. http://t.co/Iix5CT7I2M
528mining
2 Sep 14 11:25:12
123tom: $GDX opens September....Down. http://t.co/VtxihEwIOq
Market Monitor
2 Sep 14 11:21:20
$GDX: Comparing Two Gold Miners ETFs Yields Big Results http://t.co/PD2EZvsdLN http://t.co/P6pt5aMdLx
Patrick
2 Sep 14 11:00:05
#SENTISHIFTDOWN $HD $VXX $NKE $MGM $DRL $KNDI $QIHU $GLD $GDX $MNKD #quantheta
Investors Hangout
2 Sep 14 10:57:00
Emylers: $GDX Up to date company activities and other http://t.co/UyOgCCtV7T
Investors Hangout
2 Sep 14 10:57:00
Emylers: $GDX Up to date company activities and other http://t.co/YedlkfKJNy
Mark Freeman
2 Sep 14 10:53:24
$GLD update: If I had a nickel for everytime i was told on ST that my posts made no sense or were rediculous. Hmmmmm $gld $gdx $dust $slv
iHangout
2 Sep 14 10:38:58
http://t.co/vVojvVrNNL Emylers: Xtremepicks Alerts: $GDX Up to date company activities and other http://t.co/gco56MZpfp
Emylers
2 Sep 14 10:35:14
$GDX Up to date company activities and other important information about $GDX http://t.co/yrKB24aEXk
Native Texan 2.0
2 Sep 14 10:34:59
In my opinion, don't even try to BTFD in Gold until $GLD fills gap @ 120.85 and on $GDX @ 24.76, $NUGT gap @ 38.50.
Mark Freeman
2 Sep 14 10:32:06
$GLD update: Price action in gold $GLD is worrisome. 1240 $GC_F very likely. Gold miners $GDX even more vulnerable. Liking $DUST here.
Market Updates
2 Sep 14 10:21:15
$GDX: [video] Fast Money Final Trade: MWE, GDX, GNRC, KORS http://t.co/iWD19PlgPe http://t.co/AGcax4WCUz
Option Bob
2 Sep 14 10:18:42
Price action in gold $GLD is worrisome. 1240 $GC_F very likely. Gold miners $GDX even more vulnerable. Liking $DUST here.
Dona
2 Sep 14 10:15:51
RT @muathe: [VIDEO REPOST] Weekend Market Analysis 08/31/2014 [PUBLIC] $DJIA $IWM $GDX $XLF $EEM $EWJ $VXX $FXI $TZA $GDXJ $VWO http://t.co…
GoldMarketNews
2 Sep 14 10:10:41
#Gold Miners ETF GDX - last: $25.92 @ 12:55pm EST 9/2/2014 http://t.co/UG4Ev5A6P2 $GDX
				
				
By  +Follow December 6, 2013 8:22AM
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