logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Digging Into Gold Mining ETF GDX

By  +Follow December 6, 2013 8:22AM
Share:
Tickers Mentioned:

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.


Signup for our daily newsletter and get our best articles emailed right to you!

Results for gdx
SandwormPT
30 Oct 14 10:30:36
RT @chrisdieterich: I chatted with @simonconstable about $MO $MA $V and $GDX this morning | http://t.co/siVhDRq2pa
Ana❤
30 Oct 14 10:27:14
RT @chrisdieterich: I chatted with @simonconstable about $MO $MA $V and $GDX this morning | http://t.co/siVhDRq2pa
Hard Assets Investor
30 Oct 14 10:26:38
Value Trap Underneath Gold Miner Fund $GDX $GLD #gold http://t.co/WiZpvpysM5
Dave Nadig
30 Oct 14 10:15:54
Why there's no "Value" in Gold Miners #ETFs like $GDX: http://t.co/LjhU3T7W1E
Nigam Arora
30 Oct 14 10:03:30
A MUST-SEE GOLD CHART FOR SERIOUS INVESTORS AND TRADERS, PART 2 – WHEN WILL GOLD BOTTOM? $GLD $GDXJ #GOLD $GDX $SLV http://t.co/XQVZ5vXBD1
Nigam Arora
30 Oct 14 10:01:39
BREAKEVEN HARD STOP ON SILVER MINER SILVER WHEATON TRADE AROUND POSITION $SLW $GLD $SLV $GDX $GDXJ $PALL http://t.co/EZQyxycuwL
Dave
30 Oct 14 09:53:20
RT @nextbigtrade: Theres some monster future dividend streams in the miners being given away by scaredy cats right now pretty sweet $GDX
Tuan
30 Oct 14 09:52:27
$GDX smell of blood in the air..
Tim Kelleher Corp
30 Oct 14 09:52:25
Long $NUGT - $GDX has an oversold rising wedge showing
Investors Hangout
30 Oct 14 09:51:39
Jake13: $GDX Barchart Opinion Click here to find out if http://t.co/nIpZciSbjd
Investors Hangout
30 Oct 14 09:51:38
Jake13: $GDX Barchart Opinion Click here to find out if http://t.co/WrTKtdxtia
nextbigtrade
30 Oct 14 09:49:46
Theres some monster future dividend streams in the miners being given away by scaredy cats right now pretty sweet $GDX
Irrelevant Investor
30 Oct 14 09:48:56
Is $GDX buying back $IBM shares also?
Jesse Felder
30 Oct 14 09:46:11
@scotttoconnor I've been watching $GDX but I don't own any yet (nor $GLD). I'll wait and let it tell me when to buy.
Charles BAILEY
30 Oct 14 09:43:24
RT @abnormalreturns: Thursday links: averaging in and out, 52-week sector highs and bothersome solar flares. http://t.co/zUqwPRjhwT $CORN $…
Forex Insight
30 Oct 14 09:41:36
RT @abnormalreturns: Thursday links: averaging in and out, 52-week sector highs and bothersome solar flares. http://t.co/zUqwPRjhwT $CORN $…
FMD Capital
30 Oct 14 09:39:58
Noted two weeks ago the correlations between gold and market volatility. Less vol = lower $GDX $GLD for now. http://t.co/ZP42bJwOJB
ETF.com
30 Oct 14 09:38:24
Value Trap Underneath Gold Miner Fund GDX... Divergence of earnings in the gold mining sector masks risks $GLD $GDX http://t.co/MVRTcY8Z1f
Dennis P. Owens
30 Oct 14 09:37:10
RT @chrisdieterich: I chatted with @simonconstable about $MO $MA $V and $GDX this morning | http://t.co/siVhDRq2pa
Tadas Viskanta
30 Oct 14 09:35:55
Thursday links: averaging in and out, 52-week sector highs and bothersome solar flares. http://t.co/zUqwPRjhwT $CORN $GDX $AMZN $RSX $IBB
BNK Invest
30 Oct 14 09:33:26
$GOLD Stock Crowded With Sellers $GDX #gold #silver #metals http://t.co/HA63ZVu8Vy
BNK Invest
30 Oct 14 09:33:26
$AEM Crosses Critical Technical Indicator $GDX #gold #silver #metals http://t.co/FNpituVsht
iHangout
30 Oct 14 09:32:17
http://t.co/vVojvVrNNL Jake13: HDOG HUB: $GDX Barchart Opinion Click here to find out if http://t.co/HmXDTmB7zP
Jake13
30 Oct 14 09:31:19
$GDX Barchart Opinion Click here to find out if $GDX is a buy hold or sell. Watching these stocks. $XLE $T $VP http://t.co/EvCCEINaDs
BNK Invest
30 Oct 14 09:25:02
Goldcorp Becomes Oversold $GG $GDX #dividends http://t.co/HGCMZ89EUc
BNK Invest
30 Oct 14 09:19:52
$GDX Crosses Critical Technical Indicator #etfs http://t.co/dGyIwv7mcj
ETFChannel
30 Oct 14 09:19:48
$GDX Crosses Critical Technical Indicator #etfs: In trading on Thursday, shares of the Gold Miners ETF (GDX) e... http://t.co/7Gf7sxYqpJ
ShackTrades
30 Oct 14 09:19:32
BOT 19.5 COVERED in $GDX (DEC 14)
Johnny Ca$h
30 Oct 14 09:15:26
$GLD and $GDX - are they down now that QE is done? Like we didn't see this coming?
B
30 Oct 14 09:14:21
@ReutersJamie @pdacosta 2 words...BUY $GDX
Kirill Klip
30 Oct 14 09:11:12
RT @NorthmanTrader: $GDX back into 2008 crash territory. I thought the Fed had fixed everything? Nobody needs or wants commodities. http://…
john pagnotta
30 Oct 14 09:10:26
RT @BobLoukas: Some serious puking in the miners. $GDX $GDXJ $NUGT
siavash amini
30 Oct 14 08:54:22
Post-QE disaster $twtr $gdx $gld QE has been most effective in inflating asst prices. Without it, we will see a big adjustment.
wininstocks2014
30 Oct 14 08:53:43
GDX 0.04 Stock Charts $GDX Goldex Resources Corp. (CVE) Last Updated: 10/30/2014 10:53:50 GDX Stock Chart - 1 http://t.co/2VAG2IcbLK
Simon Constable
30 Oct 14 08:53:07
RT @chrisdieterich: I chatted with @simonconstable about $MO $MA $V and $GDX this morning | http://t.co/siVhDRq2pa
Stoyan Bojinov
30 Oct 14 08:51:02
$GDXJ $GDX $GLD ouchie ... fresh lows for miners.
Andrew Mutzabaugh
30 Oct 14 08:49:55
$gdx $gdxj oops. Who the hell owns this stuff?
GoldMarketNews
30 Oct 14 08:49:38
#Gold Miners ETF GDX - last: $18.49 @ 11:34am EST 10/30/2014 http://t.co/rOdUW4m7Rz $GDX
Prices Gold
30 Oct 14 08:49:34
#Gold Miners ETF GDX - last: $18.49 @ 11:34am EST 10/30/2014 http://t.co/qVVNSp0ZyS $GDX
Ben Burke
30 Oct 14 08:44:25
@KidDynamiteBlog are you ready for the massive $gdx print?
Pulsar Investments
30 Oct 14 08:43:37
We're bottom-fishing some $GDX $GDXJ. Single-day drop over 5% is just too much, there will be some solid rebounce.
San
30 Oct 14 08:42:04
GOLD Chart update: http://t.co/9CsASVvGZA $GC_F $GLD $GDX
Helmsman
30 Oct 14 08:41:35
RT @farrisbaba: $GLD $JNUG $GDX "Cause I'm freeeeeee, Free falling...... Yes I'm freeeeeee, Free falling"
farris baba
30 Oct 14 08:40:28
$GLD $JNUG $GDX "Cause I'm freeeeeee, Free falling...... Yes I'm freeeeeee, Free falling"
TAMAYO
30 Oct 14 08:38:36
RT @HCPG: We love buying dips, but only when short-term trend down is meeting up with a longer term up-trend. Haven't touched miners for yr…
Kora Reddy
30 Oct 14 08:38:31
RT @NorthmanTrader: $GDX back into 2008 crash territory. I thought the Fed had fixed everything? Nobody needs or wants commodities. http://…
Chess
30 Oct 14 08:37:58
NEW POST: Closing the Gap http://t.co/zY3U3hjzzA $FB $GDX $GDXJ $IBB $QQQ
Implosion1
30 Oct 14 08:37:48
RT @NorthmanTrader: $GDX back into 2008 crash territory. I thought the Fed had fixed everything? Nobody needs or wants commodities. http://…
Northy
30 Oct 14 08:37:21
$GDX back into 2008 crash territory. I thought the Fed had fixed everything? Nobody needs or wants commodities. http://t.co/INdnIaiPtv
Implosion1
30 Oct 14 08:29:58
RT @BobLoukas: Some serious puking in the miners. $GDX $GDXJ $NUGT
				
				
By  +Follow December 6, 2013 8:22AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.