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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for gdx
Reynaud Volmer
19 Apr 15 08:15:25
$AAPL Remember this chart from Monday? … $fcx $nem $gGLD $GDX $AMZN $vxx $aig $TBT
Muathe
19 Apr 15 07:42:53
[VIDEO REPOST] Wknd Mrkt Analysis 04/19/2015 $SPY $UWTI $EEM $GDX $UGAZ $USO $VXX $UCO $EWZ $IWM $RSX $XLF $NUGT $IYR http://t.co/hyiyJR4Cml
Langan Stocks
19 Apr 15 07:31:23
$SCG Opinions Updated Sunday, April 19, 2015 10:03:10 AM $LULU $XIV $GDX $WMIH http://t.co/CdUDGwE05c
Rosner Stocks
19 Apr 15 07:31:11
$NUGT News Updated Sunday, April 19, 2015 09:59:24 AM $GDX $CVX $V $XLE http://t.co/lCmhm8dMXl
royfberger
19 Apr 15 06:52:08
Unreal SKY tonight $MAT $TSM $IWM $PFE $DRC $LVS $CL $WTW $APC $GDX http://t.co/JUFJoVvAWo http://t.co/9SiCBT8STD
Sufiy
19 Apr 15 06:49:42
RT @TNR_Gold: Los Azules: ”One of the World’s largest undeveloped #Copper deposits“ - according to McEwen #Mining https://t.co/WdbbatpgOs $…
Wavepatterntraders
19 Apr 15 06:46:41
Going nowhere fast, maybe time to look at other markets http://t.co/stkBvqVhOZ $SPX $SPY $NG $UNG $UGAZ $GDX #elliottwave
PolgarStocks
19 Apr 15 06:30:13
$SCG Investor Opinions Updated Sunday, April 19, 2015 09:06:57 AM $TWTR $CEMP $MO $GDX http://t.co/18RL7BNT4t
IH News Desk
19 Apr 15 06:04:40
$GDX Opinions Updated Sunday, April 19, 2015 08:10:43 AM $HALO $SLB $WMIH $ADMD http://t.co/QEZdfzZVSA
IH News Desk
19 Apr 15 06:04:35
$ARUN Stock Message Board Updated Sunday, April 19, 2015 08:10:43 AM $SNDK $GDX $GLD $NUGT http://t.co/oNXAcupPWF
Sqwii
19 Apr 15 05:59:41
Weekend Outlook updated for 20th April 2015 on http://t.co/0mKLCDkO9h $SPX $VIX $INDU $GLD $SLV $SPY $QQQ $DIA $USO $UNG $GDX $COMPQ
Langan Stocks
19 Apr 15 05:28:38
$SLTD Short Sales Updated Sunday, April 19, 2015 08:03:10 AM $TEVA $EWZ $GDX $TQQQ http://t.co/UdAaE8drXm
PolgarStocks
19 Apr 15 05:28:35
$INTC Stock Forum Updated Sunday, April 19, 2015 08:06:56 AM $COWN $SWKS $SBUX $GDX http://t.co/3p5sHVOo6Q
PolgarStocks
19 Apr 15 02:26:38
$SYN Filings Updated Sunday, April 19, 2015 05:06:56 AM $GDX $HAR $ARUN $ZIOP http://t.co/VaM87u6ZkX
PolgarStocks
19 Apr 15 02:26:36
$GDX Short Sales Updated Sunday, April 19, 2015 05:06:56 AM $DLTR $EWG $BIB $EEM http://t.co/BV90GYjx4s
PolgarStocks
19 Apr 15 01:26:06
$CAT Company Info Updated Sunday, April 19, 2015 04:06:56 AM $HAR $CERN $GDX $FSLR http://t.co/a6OmI5XKVs
Langan Stocks
19 Apr 15 01:25:17
$EA Stock Message Board Updated Sunday, April 19, 2015 04:03:10 AM $WMIH $EWJ $BIB $GDX http://t.co/VzXVK0CVVD
D. Owen
19 Apr 15 00:15:04
RT @seeitmarket: The State Of The #Gold Bear Market (archives) - http://t.co/cknD0PXIN5 by @andrewnyquist $GLD $GDX $EURUSD $STUDY
Wavepatterntraders
19 Apr 15 00:13:42
$GDX would help if I posted a chart huh!!! $HUI http://t.co/cLMXKh8sJ6
Wavepatterntraders
19 Apr 15 00:12:17
$GDX Could be worth watching $HUI its met a 1x1 in time and price.
PolgarStocks
18 Apr 15 23:25:07
$KS Financials Updated Sunday, April 19, 2015 02:06:57 AM $AXP $SBUX $GDX $INCY http://t.co/2HxBrJJp5W
Rosner Stocks
18 Apr 15 23:23:38
$XLV Investor Opinions Updated Sunday, April 19, 2015 01:59:22 AM $RXMD $V $GDX $LEMB http://t.co/0iqhqvvmlv
PolgarStocks
18 Apr 15 22:24:06
$USO News Updated Sunday, April 19, 2015 01:06:56 AM $GDX $ITB $CERN $WMT http://t.co/IAsk2ENrRn
Avon
18 Apr 15 22:23:33
RT @seeitmarket: The State Of The #Gold Bear Market (archives) - http://t.co/cknD0PXIN5 by @andrewnyquist $GLD $GDX $EURUSD $STUDY
Bradley
18 Apr 15 22:09:09
Find your own trading path. $MAT $TSM $IWM $PFE $GOOG $AAPL $DRC $LVS $CL $WTW $APC $GDX http://t.co/l9JkTCtpHR http://t.co/WaXwFIxYhg
AlsoThere
18 Apr 15 22:01:26
RT @seeitmarket: The State Of The #Gold Bear Market (archives) - http://t.co/cknD0PXIN5 by @andrewnyquist $GLD $GDX $EURUSD $STUDY
Nereida Diesen
18 Apr 15 21:25:33
The State Of The #Gold Bear Market (archives) - http://t.co/oEoHKAfsGX by andrewnyquist $GLD $GDX $EURUSD $STUDY
See It Market
18 Apr 15 21:08:53
The State Of The #Gold Bear Market (archives) - http://t.co/cknD0PXIN5 by @andrewnyquist $GLD $GDX $EURUSD $STUDY
Langan Stocks
18 Apr 15 20:21:08
$TSLA Financials Updated Saturday, April 18, 2015 11:03:08 PM $GDX $EBAY $PFE $SWKS http://t.co/jvsH7ZqyBA
Sam
18 Apr 15 20:06:07
One more before bed! Love ya'll! $MAT $TSM $IWM $PFE $DRC $LVS $CL $WTW $APC $GDX http://t.co/YU579z0Ece http://t.co/wqxL9a27jr
Langan Stocks
18 Apr 15 19:20:04
$XLU Financials Updated Saturday, April 18, 2015 10:03:08 PM $VXX $GDX $MRK $GE http://t.co/sGwQGZhNfd
royfberger
18 Apr 15 17:38:07
Unreal SKY tonight $MAT $TSM $IWM $PFE $DRC $LVS $CL $WTW $APC $GDX http://t.co/JUFJoVvAWo http://t.co/KRdhNhL30x
NewsTalk
18 Apr 15 17:27:19
RT @etfguide: WATCH: Don't Let These Behavior Traits Burn Your Money! http://t.co/ETtf822qvK $NFLX $AAPL $DIA $GDX
Rosner Stocks
18 Apr 15 16:17:41
$GDX Short Sales Updated Saturday, April 18, 2015 6:59:25 PM $FWDG $WYNN $PM $MRK http://t.co/9itmMGhL27
PolgarStocks
18 Apr 15 16:17:04
$GDXJ Opinions Updated Saturday, April 18, 2015 7:06:58 PM $PACB $ATVI $GDX $UUP http://t.co/dl1OLJjlxA
IH News Desk
18 Apr 15 13:50:10
$USO Percent Change Updated Saturday, April 18, 2015 4:11:14 PM $PSLV $GM $GDX $PSLV http://t.co/USmX1gUTa2
IH News Desk
18 Apr 15 13:50:09
$ILF Filings Updated Saturday, April 18, 2015 4:11:14 PM $TKMR $BX $STX $GDX http://t.co/O3d3arViaZ
V-Trader
18 Apr 15 12:43:09
$GDX we should know in about a week if this is a right shoulder forming. I think we dont form that pattern & break out over 20
Chris
18 Apr 15 10:26:49
RT @etfguide: WATCH: Don't Let These Behavior Traits Burn Your Money! http://t.co/ETtf822qvK $NFLX $AAPL $DIA $GDX
Rosner Stocks
18 Apr 15 10:11:13
$XLB Short Sales Updated Saturday, April 18, 2015 12:59:23 PM $GDX $RUSS $EBR $GERN http://t.co/G4icj7jQAB
MasterChartsTrading
18 Apr 15 09:59:49
I explain $GDX market breadth in details @ 8:25 mark here: http://t.co/qati1NjH5l $DUST $NUGT
MasterChartsTrading
18 Apr 15 09:53:59
Bear-market rally in #gold may still have some room to run to the upside. Watch @ 6:09 mark http://t.co/fAF5OqzpgC $GLD $GDX $DUST $NUGT
Bradley
18 Apr 15 09:47:06
Find your own trading path. $MAT $TSM $IWM $PFE $GOOG $AAPL $DRC $LVS $CL $WTW $APC $GDX http://t.co/l9JkTCtpHR http://t.co/HlTX34NXtC
IH News Desk
18 Apr 15 09:46:38
$RIGH Recent News Updated Saturday, April 18, 2015 12:11:14 PM $GDX $ZA $XLP $UGAZ http://t.co/p3p6C145Lt
IH News Desk
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$TQQQ Opinions Updated Saturday, April 18, 2015 12:11:14 PM $GDX $NUGT $ARIA $NVAX http://t.co/2iNs9fxzNM
SmallCaps
18 Apr 15 09:27:05
http://t.co/O5akYXpMLF <-- This millionaire trader changed my life! $CYBR $CY $INTC $GDX $TTPH #stocks #trading
Langan Stocks
18 Apr 15 09:10:44
$UTX Financials Updated Saturday, April 18, 2015 12:03:20 PM $JCP $BMY $GDX $COP http://t.co/0ok6tXtsht
PolgarStocks
18 Apr 15 09:10:15
$MON Investor Opinions Updated Saturday, April 18, 2015 11:07:16 AM $XOM $NVAX $VZ $GDX http://t.co/XlyucTRYX4
Sufiy
18 Apr 15 09:05:03
RT @kirillklip: James Turk: The Gold In London Is Pretty Much Gone. https://t.co/xCobPztboQ $GLD $GDX $GDXJ $MUX $TRRXF $ABX $NG
Sufiy
18 Apr 15 09:03:57
RT @TNR_Gold: “@HedgehogTrader: $GDX http://t.co/u2lwGJySWV” #Gold
				
				
By  +Follow December 6, 2013 8:22AM
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