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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
Ken
22 Oct 14 18:30:12
$UUP Looks like a big move coming for the #Dollar $GDX $GLD $GDXJ #gold http://t.co/P2uqRDGiZC
Stephen s
22 Oct 14 18:26:39
RT @IHNewsDesk: $HPNN P/E Ratio Click Here: Also See: $SQQQ $ECOP $IYT $GDX ~
Paul Stiles
22 Oct 14 18:09:50
$gdx hasn't bounced in months and is going to break down
Langan Stocks
22 Oct 14 18:08:04
$IDGC Quotes Click Here: http://t.co/WkZsClfdzF Also See: $SSO $SIMH $SSYS $GDX ~
IH News Desk
22 Oct 14 17:58:17
$IBIO Day Low Click Here: http://t.co/QbLaH1FtID Also See: $YELP $SBUX $GDX $ERX ~
TV_Trading Ideas
22 Oct 14 17:46:15
Watch for free fall. $18 is next $GDX http://t.co/UZBJ2QKp8T
IH News Desk
22 Oct 14 17:45:29
$HPNN P/E Ratio Click Here: Also See: $SQQQ $ECOP $IYT $GDX ~
Quantheta
22 Oct 14 17:00:02
#SENTISHIFTDOWN $MSFT $PCLN $BAC $GDX $TSLA $GPRO $GOLD $IBIO $GOOG $T #quantheta
Quantheta
22 Oct 14 16:00:02
#SENTISHIFTDOWN $MSFT $PCLN $TSLA $GDX $BAC $GPRO $GOLD $UGAZ $IBIO $GOOG #quantheta
Woll Street
22 Oct 14 15:55:43
The chart is inverse $GDX
IH News Desk
22 Oct 14 15:38:17
$EPAZD Ex-Div Date Click Here: http://t.co/NKHeupQEBs Also See: $GILD $FREE $DE $GDX ~
Stock Relay
22 Oct 14 15:31:22
$AMBA Change Click Here: http://t.co/GLGEmATmUo Also See: $GDX $MO $ACHN $CENX ~
Sufiy
22 Oct 14 15:25:02
M&A Watch: Los Azules #Copper - Acquisitions signal a turning market for #miners. $MUX $TNR.v $GDX $FCX $BHP http://t.co/7tDPJDir3u
Prices Gold
22 Oct 14 15:16:12
#Gold Miners ETF GDX - last: $20.4399 @ 4:00pm EST 10/22/2014 http://t.co/eOIHCzJMNf $GDX
GoldMarketNews
22 Oct 14 15:16:11
#Gold Miners ETF GDX - last: $20.4399 @ 4:00pm EST 10/22/2014 http://t.co/hQISZdhGIq $GDX
Stockaholics
22 Oct 14 14:52:35
Our Penny Stock Picks Gained 371% In 2 Weeks! Get Our Next Pick Early: http://t.co/z2noBUWrEP $MDMT $COHO $GDX
Edward Gofsky
22 Oct 14 14:51:24
$DUST 3x Bear ETF gold stocks. Bullish {Cup+Handle} setup. $GLD $GDX $SLV $HGD.TO #stocks #markets http://t.co/cnz5jEBgFw
Barry Scott
22 Oct 14 14:25:40
One's a teenager again the other single, $NUGT -9% $JNUG -15.7%, daily adjustment & volatility erode 3x ETFs, $GDX better aft 10/28 $GLD
OxoTHuk
22 Oct 14 14:23:59
RT @paulwoll: If $GDX breaks down measured move is in low teens.
Stock Relay
22 Oct 14 14:22:25
$AA Change Click Here: http://t.co/B0bTnqFrnm Also See: $GOOG $GDX $LUV $RSX ~
OptionsGeek
22 Oct 14 14:08:55
RT @paulwoll: If $GDX breaks down measured move is in low teens.
Ani Anirudhan
22 Oct 14 14:07:51
RT @paulwoll: If $GDX breaks down measured move is in low teens.
Timothy Parker
22 Oct 14 14:06:54
RT @paulwoll: If $GDX breaks down measured move is in low teens.
Woll Street
22 Oct 14 14:05:03
If $GDX breaks down measured move is in low teens.
Quantheta
22 Oct 14 14:00:02
#SENTISHIFTDOWN $MSFT $PCLN $TSLA $GPRO $GOOG $GDX $GOLD $IBIO $PLUG $UGAZ #quantheta
BrutusMaximus
22 Oct 14 13:42:54
$GDX has not been this cheap relative to $GLD in at least 20 years
John Constantine
22 Oct 14 12:58:51
$JNUG $GDX tested low on 1/4 volume today daily - Tom Obrien #TFNN
John Constantine
22 Oct 14 12:55:40
$SI_F 17.13 $GC_F 1242 - Miners ZERO - $JNUG $GDXJ $GDX $HUI $XAU $XAUUSD
Helmsman
22 Oct 14 12:48:58
Check my tweets from yesterday to see when I entered my $GDX puts. Thanks @autumnalcity87 !!
Helmsman
22 Oct 14 12:46:13
you have to let it do it's thing. You can't let the size of profits drive your decision making. All logic says this is the beginning $GDX
Jack
22 Oct 14 12:23:24
They are dumping gold. $GLD $GDX $DUST
Barbara Kollmeyer
22 Oct 14 12:15:32
RT @codywillard: Market is saying that the $GDX $GDXJ gold miners aren't profitable enough below $1300/oz to be a good trade/in... http://t…
GoldMarketNews
22 Oct 14 12:15:07
#Gold Miners ETF GDX - last: $20.595 @ 2:59pm EST 10/22/2014 http://t.co/NoTDwTJXOX $GDX
Prices Gold
22 Oct 14 12:15:05
#Gold Miners ETF GDX - last: $20.595 @ 2:59pm EST 10/22/2014 http://t.co/GW7L2ueAUH $GDX
Joshua Payne
22 Oct 14 12:04:18
RT @codywillard: Market is saying that the $GDX $GDXJ gold miners aren't profitable enough below $1300/oz to be a good trade/in... http://t…
Leilani Pips
22 Oct 14 12:03:31
RT @codywillard: Market is saying that the $GDX $GDXJ gold miners aren't profitable enough below $1300/oz to be a good trade/in... http://t…
Cody Willard
22 Oct 14 12:02:47
Market is saying that the $GDX $GDXJ gold miners aren't profitable enough below $1300/oz to be a good trade/in... http://t.co/C15LuZh6zM
Quantheta
22 Oct 14 12:00:02
#SENTISHIFTDOWN $MSFT $PCLN $GPRO $TSLA $GOOG $UGAZ $IBIO $GOLD $PLUG $GDX #quantheta
Thu Real Matt
22 Oct 14 11:38:03
$GDX flirting with 20 demand (for now), call me crazy go ahead but be careful long $NUGT $DUST $GLD http://t.co/BtURmxgOIb
TradingView
22 Oct 14 11:30:02
$GDX - GDX update - 10/21/2014 - https://t.co/10xw7P6nR3
NelsNYC
22 Oct 14 11:22:42
@chart_freak $GDX $GDXJ devastated.... no love there
Grant Beasley
22 Oct 14 11:21:01
$GDX gone. Behaved like a PIG. v. small ding
Investors Hangout
22 Oct 14 11:20:42
danrocks: $HYG Hitting Buzz $XLE $EXK $SWKS $XLK $GDX http://t.co/qtLWDCE1J4
Investors Hangout
22 Oct 14 11:20:42
danrocks: $HYG Hitting Buzz $XLE $EXK $SWKS $XLK $GDX http://t.co/9AV55MfRjy
Creditspread23
22 Oct 14 11:16:41
RT @paulwoll: $GDXJ $GDX are treacherous still..
Stock Forums
22 Oct 14 11:13:05
$BRK/B Quotes Click Here: http://t.co/oBz7PKh69e Also See: $GILD $VIPS $EWJ $GDX ~
★★★★★
22 Oct 14 11:09:41
@abdulnasser15 اي والله انا ماسك $GDX كول مارس نايم ينتظر كسر معدلات نفسيه
Gary Manzano
22 Oct 14 11:01:52
@canuck2usa $GDX looking really weak..
Stockaholics
22 Oct 14 11:00:13
Our Penny Stock Picks Gained 371% In 2 Weeks! Get Our Next Pick Early: http://t.co/z2noBUWrEP $MDMT $COHO $GDX
danrocks
22 Oct 14 10:57:14
$HYG Hitting Buzz $XLE $EXK $SWKS $XLK $GDX http://t.co/RZaErZJqO5
				
				
By  +Follow December 6, 2013 8:22AM
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