Today marks the beginning of a new segment on Breakout called "The Trade" where we don't just talk about markets, but tell you the best way to play the day's hottest stories. All opinions are my own. It isn't advice on what to do with your portfolio, your money is your own. The Trade is about explaining the facts at hand and telling you what I'd do with my personal portfolio.
Today's Trade: Market Vector's Gold Miner ETF (GDX), commonly referred to as its ticker symbol. The GDX is designed to trade in line with the fortunes of the most prominent gold mining companies in the world. Companies like Barrick Gold (ABX), Goldcorp (GG) and Newmont (NEM) are three of the largest component companies.
Now that you know what it is here's the story, as discussed with Yahoo! Finance senior columnist Michael Santoli in the attached video. The GDX is more than 5% higher today driven by a more than 2.5% rally in gold prices. The ostensible driver of the gold rally is Ben Bernanke's comments regarding the future of interest rates. As has been the case for the last 18-months, gold needs a specific catalyst to justify a rally and no excuse at all to plunge.
Which brings us to the miners.
If owning gold over the last year has been painful, being long the GDX has been so brutal it would make Torquemada squeamish. Even including today's rally the GDX has lost 47% year-to-date and more than 40% for the last 12-months.
Unlike gold itself, patient owners of the ETF have been crushed as well. Despite the precipitous decline in gold, investors in the SPDR Gold Shares ETF (GLD) have made more than 20% over the last five years. Over the same time GDX holders have lost 50%.
Sometimes the market gives investors an opportunity to gracefully exit losing positions. If you've been lugging around the GDX today is your chance to hit the sell button and look for better investments. At last count there are roughly 15,000 publicly traded companies in the world. At least 14,900 of them have better prospects than the GDX.
- Investment & Company Information
- Barrick Gold