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- The recent apocalyptic gold-stock capitulation left this sector as cheap as it’s ever been relative to gold! Nearly everyone wrongly believes the gold miners are doomed.
- With these stocks now trading at levels last seen when gold was around $350, the upside potential in this left-for-dead sector is truly vast.
- Gold-stock price levels today are fundamentally absurd, and overdue to mean revert sharply and radically higher in the coming months.
- Insiders have not been buying gold mining stocks.
- Tax-loss selling season is just around the corner.
- An interim bottom for GDX might have occurred on Wednesday, but it is probably headed for lower lows in the future.
Deeply Undervalued Gold Stocks' Young Upleg Remains Intact
- Gold stocks remain radically undervalued relative to the metal which drives their profits, even at today’s dismal gold levels.
- But after gold stocks fell faster than gold for 6 long years, this secular trend has reversed over the past year despite the extreme bearishness plaguing this sector.
- Gold stocks’ mean reversion back up to normal valuations should run for at least several more years, where major gold stocks ought to at least quadruple.
Value Can Hide In The Least Favorite Sectors: Market Vectors Gold Miners ETF
- Never let past performance dictate future results.
- GDX offers low correlation to equity markets.
- Central banks actions will ultimately be positive for gold.
- Buying value, even when out-of-favor, can provide significant alpha.
- The proof is in the pudding (or holdings).
- The GDX gold stock ETF has grown into a fine sector benchmark. It has far more, and many better, companies than the flagship HUI gold stock index.
- Investors and speculators who just want basic diversified gold stock exposure are well-served by GDX, as it tracks gold stocks perfectly.
- However, investors and speculators willing to build a smaller still-diversified portfolio of elite best-of-breed gold and silver stocks will enjoy far greater gains than GDX can ever provide.
Market Vectors Gold Miners ETF: Catching A Falling Knife
Market Vectors Gold Miners ETF Moves Along With Index Changes
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Mon, Feb. 3, 10:26 AM
- Gold is up 1.8% to $1,262 per ounce and silver 1.9% to $19.49 following the big miss in the ISM report as traders contemplate maybe a slowdown in the taper, and some bulls dream about a QE4. Up 1.5% at the moment the Gold Miners ETF is ahead 12.9% YTD.
- The 10-year Treasury yield is off 3 basis points to 2.62% and the December 2016 Eurodollar contract is up 9 basis points to 97.99 - suggesting a slower pace of rate hikes, but still pricing in a Fed Funds rate 175 basis points higher than it is today.
- Gold and sliver-related ETFs: GLD, SLV, GDX, GDXJ, NUGT, IAU, AGQ, PHYS, DUST, SIL, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DSLV, DBS, SLVP, GLTR, DGZ, AGOL, JNUG, DBP, DGLD, GLDI, RING, GGGG, SLVO, WITE, SILJ, PSAU, JDST, TBAR, USV, UBG, JJP, RGRP, BLNG
Wed, Jan. 29, 9:49 AM
- As equities open in a broad-based decline, precious metals miners show early strength: ABX +4.1%, NG +4.1%, EXK +3.7%, GG +3.7%, IAG +3.3%, SA +2.9%, AG +2.8%, SSRI +3.1%, AUY +2.7%, GOLD +2.5%, NEM +2.3%, MVG +2.3%, SLW +2.2%, PAAS +2.2%, AU +2.1%, KGC +2.2% (Briefing.com).
- ETFs: GLD, SLV, GDX, GDXJ, NUGT, IAU, AGQ, PHYS, DUST, SIL, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DSLV, DBS, SLVP, GLTR, DGZ, AGOL, DBP, JNUG, DGLD, GLDI, RING, GGGG, SLVO, WITE, SILJ, PSAU, TBAR, JDST, USV, UBG, JJP, RGRP, BLNG.
Tue, Jan. 28, 3:04 PM
- The big question as gold miners earnings results begin to roll in next week - "Can miners cut costs fast enough to satisfy investors?"
- JPMorgan's John Bridges expects an average reduction in all-in costs of about $100 per ounce this year, and notes the mid-point of recent Goldcorp (GG) guidance was $90. However, he adds, while some of the savings are sustainable, deferring things like truck and equipment purchases can't go on forever. He notes Kinross (KGC -0.2%) announced a 40% reduction in capex this year, but suggested reinvestment would be required at some point.
- Ahead of results, the Gold Miners ETF (GDX +1.2%) continues its big 2014, now up 9.6% YTD.
- First up on the earnings front is New Gold (NGD) next Thursday, followed by Kinross six days later, and then Barrick Gold (ABX) the day after that.
- Miner ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DGZ, AGOL, DGLD, GLDI, TBAR, UBG
Sat, Jan. 25, 10:50 AM
- As gloom and doomish as he's ever been at the Barron's Roundtable, Marc Faber does, however, lean against Felix Zulauf's recommendation to short the Hong Kong ETF (EWH) as a play on a credit bust in China. Property companies are a big component of the Hong Kong stock market, says Faber, and may have already priced in an implosion as they're selling for just 40-50% of asset values. "I would rather buy Hong Kong shares and short the Nasdaq," says Faber.
- It goes without saying that Faber is bullish on gold, but he's a bigger fan of the miners (GDX), noting the fast pace of insider buying in the industry. A member of the board at Sprott, Faber says Eric Sprott has been selling company stock to buy shares in small miners (GDXJ). "If the gold price goes up 30%, Sprott's shares might double, but mining stocks could go up four times."
- Gold mining ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, JNUG, GGGG, PSAU, JDST
- Making a decent run after a horrid 3-year stretch, the GDX is up 12% YTD; GDXJ up16.8%.
Sat, Jan. 18, 9:25 AM
- Many have predicted the demise of the China boom and were early, says Felix Zulauf at the Barron's Roundtable, but now it's more obvious "it's in a terminal stage." He's playing it by shorting the iShares MSCI Hong Kong ETF (EWH). The Hong Kong banking system is heavily exposed to mainland China, so when China goes, there could be a banking crisis in Hong Kong. The HK$ is pegged to the greenback, so the HKMA will defend it by hiking rates, smacking the heavily rate-sensitive economy there.
- It's been nearly a decade since Zulauf recommended gold miners, but now's the time the buy the GDX, he says. Gold (GLD) is "washed out ... those who wanted to sell gold have sold it ... Western investors, asset-allocators, ETF players have all sold their gold. The buyers? "Physical gold moved from Western to Eastern hands."
- After 30 years of declining yields, Zulauf isn't a secular bull on U.S. Treasurys, but sees mis-pricing in government paper, noting French 10-year notes yield 50 bps less than comparable U.S. ones. The 10-year Treasury yield could easily fall 75-100 bps and he's a buyer of TLT.
- China-related ETFs: FXI, PGJ, GXC, FXP, HAO, YINN, CYB, CNY, TAO, CHIQ, CHIX, ASHR, YANG, MCHI, PEK, CQQQ, KWEB, DSUM, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, ECNS, YXI, CHIE, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
- Gold and gold miner ETFs: GLD, GDX, GDXJ, NUGT, IAU, PHYS, DUST, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DGZ, AGOL, DGLD, GLDI, RING, GGGG, JNUG, PSAU, TBAR, JDST, UBG
- Long-dated Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, SBND, ZROZ, DLBS, VGLT, UBT, TLO, LBND, TYBS, TENZ, DLBL
Fri, Jan. 17, 6:30 PM
- Finding safety in gold miners (GDX) seems like an oxymoron these days, but Barclays believes some in the group offer “downside protection" if the price of gold doesn’t fluctuate too much in 2014.
- Barclays believes reduced volatility in gold prices will allow for more certainty in making investment decisions regarding gold equities, which should benefit the sector given it is broadly under-owned; also, North American producers are poised to reduce operating costs on average vs. 2013, which should increase producers’ operating leverage to the gold price.
- When capital begins to flow back into the sector, the firm thinks some investors will favor gold companies that offer protection from lower gold prices or leverage to flat gold prices.
- Barclays names Goldcorp (GG) and Yamana Gold (AUY) as companies with strong production growth, falling costs, declining capital obligations and less debt than competitors.
Fri, Jan. 17, 4:18 PM
Tue, Jan. 14, 4:48 PM
- "Do not sell your gold," says Jeff Gundlach, suggesting the yellow metal could hit $1,350 this year. "If you want to speculate, I would be on the long side of the miners." He's long some of them and making some money lately, but overall losing cash on the trade.
- Gundlach scratches his head over the giddiness with which many analysts greet declines in the gold. It's just another asset, after all.
- ETFs: GLD, GDX, GDXJ, NUGT, IAU, PHYS, DUST, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DGZ, AGOL, GLDI, DGLD, RING, GGGG, JNUG, PSAU, TBAR, JDST, UBG
Tue, Jan. 14, 11:30 AM
- "For contrarians, the [gold] outlook appears brighter," write the Ned Davis commodity team of John LaForge and Warren Pies, acknowledging the curiosity of the metal's slump despite central banks printing away and unprecedented physical demand from China.
- The metal is oversold on multiple levels they say, and has good long-term support in the mid-1,100s range. If gold rallies, they continue, then so will the miners.
- Timing is a tough issue, but their best guess is sometime around the end of this quarter, triggered by a mid-year stock market correction. Look for the metal and miners to move first, and the equity downdraft to follow.
- Gold (GLD -0.9%) is off marginally today to $1,249 per ounce, but the broad mining sector (GDX -0.9%) isn't showing any benefit from a $7.50 per share cash offer for Allied Nevada by China Stone Mining Development.
- From yesterday: Goldcorp offers $2.6B for Osisko.
- Related ETFs: GLD, GDX, GDXJ, NUGT, IAU, PHYS, DUST, SGOL, UGL, DGP, GLL, GLDX, DZZ, UGLD, DGL, DGZ, AGOL, GLDI, DGLD, RING, GGGG, JNUG, PSAU, TBAR, JDST, UBG
Fri, Jan. 10, 3:49 PM
- Gold futures settle at a four-week high, rising 1.4% to $1,246.90, as the surprisingly weak jobs report reopens debate over the pace of bond buying at the Fed; precious metals miners are far outpacing the broader market, with the top gold miner ETF (GDX) surging 3%.
- Among the top miners: ABX +2.3%, GG +3.3%, NEM +2.4%, AU +3.8%, KGC +1.3%, GFI +4.3%, AUY +2.8%, RGLD +5.3%, AGI +2%, AEM +4.5%, SLW +4.4%, IAG +1.9%, FNV +1.5%, CDE +2.3%, EGO +3.8%, NGD +2.9%, NG +6.9%, HMY +2.7%.
- ETFs: GDXJ, NUGT, DUST, SIL, GLDX, SLVP, RING, GGGG, SILJ, JNUG, PSAU, JDST.
Wed, Jan. 8, 1:21 PM
- With the gold mining sector at its cheapest relative value in at least two decades (according to Bloomberg), investment bankers are sniffing around in hope of a rebound in M&A deals. There were just $10.1B in gold producer deals last year, 4.4% less than 2012, and the lowest total since 2004. A pickup in activity, however, was seen in December, with both Goldcorp (GG -0.9%) and Newmont Mining (NEM -1.7%) saying they're looking to add low-cost operations.
- “Majors who have done portfolio optimization will look at some of the juniors and say, ‘Here’s a chance for us to acquire a potentially better asset than we’ve sold and to mitigate the loss of production,’” says Barclays' Paul Knight.
- Possible targets might include single-project developers like Pretium Resources (PVG) and Torex Gold (TORXF +5.3%).
- Thanks to a regime of cost cuts, the 10 largest producers - led by Barrick Gold (ABX -1.7%) - should have some firepower, maybe generating $4.17B of free cash flow this year vs. a negative $1.74B in 2013, says Bloomberg. At the same time, exploration and development companies - who rely on regular financings - have good incentive to sell. “Darwinism is alive and well in the gold industry right now,” says Fidelity's Joe Wickwire. "While ultimately there will be fewer companies producing less gold, “the profitability of the industry is going to go up.”
- ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST
Wed, Jan. 8, 12:42 PM
- Moody’s is reducing its forward view for the average price of gold and silver in 2014 and beyond to $1,100/oz and $18/oz, respectively, dealing another blow to a precious metals sector already reeling from high costs and low investor confidence.
- The decision means Moody’s likely will take a harsher view of the prospects of the companies whose debt it rates, potentially leading to rating downgrades and higher borrowing costs for miners.
- Moody's rates most of the largest gold producers including Barrick Gold (ABX -1.8%), Newmont Mining (NEM -1.6%), AngloGold (AU -2.1%), Goldcorp (GG -1.5%) and Kinross (KGC -1.1%); ABX and AU already are on a negative outlook from the agency.
- Fundamentals "seem unfavorable over the next couple of years as the global economy maintains forward momentum, governments unwind various stimulus programs, and the threat of inflation remains subdued in most major economies," Moody's writes.
- ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST, SIL, SLVP, SILJ.
Tue, Jan. 7, 11:30 AM
- "The bottom line is that several factors, including chart patterns, sentiment and momentum indicators show signs of life for both (precious) metals and metals mining stocks," writes technician Michael Kahn.
- He notes the GLD - bottoming last month at about the same level as it did in June ($115, or $1,180 per ounce for gold) - is beginning to form a double-bottom chart pattern, though there remains a ways to go before this would be confirmed. The iShares Silver Trust (SLV) is showing a similar formation.
- The GDX is notable for a bullish divergence in which the relative strength index rises even as the price action makes lower lows - "the first sign that the bears have lost their power."
- "Resilience last week in the face of a rallying U.S. dollar shows that there were forces supporting gold other than simple currency factors."
- Gold and silver ETFs: GLD, SLV, IAU, AGQ, PHYS, SIVR, USLV, ZSL, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DSLV, DBS, DGZ, AGOL, GLDI, DGLD, SLVO, TBAR, USV, UBG
- Gold miner ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST
Fri, Jan. 3, 4:20 PM
Fri, Jan. 3, 10:37 AM
- You can profit on the gold miners in the 2014, says Goldman, but not by owning them. Instead, says the team, take note of the divergence in volatility on the SPDR Gold Trust (GLD) and the Market Vectors Gold Miners ETF (GDX).
- While the miner's ETF volatility is priced for a nightmare scenario, volatility on the price of gold itself has failed to keep pace. A straddle - in which a punter sells both a put and call option on the GDX - would pay off if the market "begins to chill out on the subject of gold miner volatility," writes Brendan Conway.
- As far as the metals or the miners, they're not yet a buy. “With rising U.S. rates and a less accommodative Fed, we believe a sharp rise in the gold price and gold miner profitability is the least likely scenario."
- Miner ETFs: GDX, GDXJ, NUGT, DUST, GLDX, GGGG, RING, JNUG, PSAU, JDST
Thu, Jan. 2, 3:17 PM
- Gold is having its biggest day in three weeks, up 1.8% to $1,224 per ounce, and silver is higher by 3.3%, with optimism about boosted demand from Asia as good of an excuse as any for the rally.
- Chatter from India about the rate hike cycle not just being over, but about to go into reverse is helping, as is a New Year's Eve move by the RBI to loosen control over gold imports.
- GLD +1.7%, SLV +3.1%
- The miners get off on the right foot in 2014 as well: GDX +3.8%, SIL +3.3%.
- Related ETFs: GLD, SLV, IAU, AGQ, PHYS, SIVR, PPLT, USLV, PALL, ZSL, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DBS, DSLV, DGZ, PTM, AGOL, GLDI, DGLD, SLVO, PGM, TBAR, USV, UBG, GDX, GDXJ, NUGT, DUST, SIL, GLDX, SLVP, GGGG, RING, SILJ, JNUG, PSAU, JDST
GDX vs. ETF Alternatives
The Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index. The Index provides exposure to publicly traded companies worldwide involved primarily in the mining for gold, representing a diversified blend of small-, mid- and large- capitalization stocks. As such, the Fund is subject to the risks of investing in this sector.
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