Gold Miners ETF Caputures Upside, Avoids Individual Company Risk

| About: VanEck Vectors (GDX)

On Oct. 25, I noted the positive price action in gold which consisted of a sharp 1-day sell-off and a quick recovery. At the time, gold was trading in the low $590's and the HUI was at 316. Since then, gold has climbed to $620's and the HUI has consolidated in the high 320's where several retracement levels congregated.

We saw similar actions yesterday, where gold was up ~$16 after easing over $8 the day before. Concurrently, HUI gained over 3% to 338+. The minor drawback I can see is that the PM stocks are in overbought territory. A prudent plan for gaining PM exposure anew may be to take some position now and the rest upon a pull back to the low 330's.

One way to capture the upside in the miners while circumventing individual company risk is through the Market Vectors Gold Miners ETF (NYSEARCA:GDX). Over its short life, it has a very high correlation to the HUI index.

gdx vs. hui

PMs are extremely volatile, so please be sure to do you due dilligence and adhere to a strict allocation and stop-loss discipline.

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