Is GDX A Worthy Gold Stock Benchmark?

Adam Hamilton profile picture
Adam Hamilton
11.09K Followers

Summary

  • 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 (NYSEARCA:GDX) is slowly becoming the de facto standard for measuring gold stock performance. Nearing its eighth birthday, GDX has even usurped the venerable HUI gold stock index as this sector's metric of choice in many circles. While GDX has advantages and disadvantages compared to the traditional HUI, it is an excellent gold stock benchmark, but it still falls far short of individual stock picking.

Gold stock speculation and investment isn't easy. Like any sector, it takes a great deal of experience and expertise to understand what the miners and explorers are doing and separate the wheat from the chaff. In some ways, analyzing gold stocks is even harder. As the consummate contrarian sector, gold stocks get very little coverage in the mainstream financial press. So the best of breed aren't widely known.

This relative information vacuum leaves gold stocks somewhere between a challenge and a minefield for individual investors. Without the time or resources to spend years intensely studying this obscure little sector, it's virtually impossible to pick the winners. This gap left by Wall Street's total disinterest has been filled for decades by financial newsletters. Rare contrarians like us do the heavy lifting and sell our results.

Back in early 2006, as the exchange-traded-fund boom was just ramping up, gold stocks were actually flying. The flagship NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index, better known by its symbol HUI, had rocketed 98.4% higher in just over 8 months. Excitement in gold stocks was as great as it's been in their entire secular bull, a perfect environment for Van Eck Global to launch its GDX ETF.

While ETFs are common and ubiquitous today, GDX was revolutionary at its birth. It gave individual and institutional investors and speculators an easy and efficient way to get

This article was written by

Adam Hamilton profile picture
11.09K Followers
A lifelong student of the markets, speculator, and investor, decades of experience have forged Adam into a hardcore contrarian. He believes in buying low when others are afraid, then later selling high when others are brave. He founded the financial-market research company Zeal LLC, and continues to write acclaimed weekly and monthly subscription newsletters.

Recommended For You

Comments (13)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.