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Gold Miners: Is GDX Back?


  • Fed Chair Yellen's testimony before congress struck a dovish tone, which indicated that normalization will be a long process and an additional rate hike may not be warranted this year.
  • Goldman Sachs's gold call from May has played out extremely well, and as forecast, the bank is now bullish on gold, expecting year-end prices to be above $1,250.
  • Developments on the Korean Peninsula are turning increasingly dire as diplomacy appears to have failed, opening the door for a possible preemptive strike from the U.S. military.
  • In addition to the increasingly favorable fundamental elements surrounding gold, gold mining stocks have strong underlying metrics, including extremely low short interest.
  • The takeaway: What is good for gold is also favorable for gold miners, and it appears that numerous favorable elements are coming together that may propel GDX considerably higher.

The VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) is having a good week for a change and is now up for a third consecutive day after bouncing off the $21 support level. As of 9:40 am on Wednesday, July 12th, GDX was trading at approximately $22.00, roughly 5% higher than the low hit just 2 days ago. However, an instrumental question remains as to whether there is more room for significant upside concerning the gold mining sector or if this is simply a short-term bump higher. Various fundamental and technical factors appear to be signaling that the precious metals sector may have more room for significant upside. This analysis explores the different elements that are likely to influence GDX's price going forward and could elevate its price meaningfully higher from current levels.

GDX at a Glance

GDX aims to replicate as closely as possible the price and yield performance of the NYSE Arca Gold Miners Index (GDMNTR), which is intended to track the overall performance of companies involved in the gold mining industry. The ETF has total net assets in the amount of $8 billion and has 51 holdings. Some of the fund's top holdings include Barrick Gold Corp. (ABX), Newmont Mining Corp. (NEM), Franco-Nevada Corp. (FNV), Newcrest Mining Ltd. (NCM), Goldcorp Inc. (GG), Agnico Eagle Mines Ltd. (AEM) as well as other gold mining companies.

Fed Chair Yellen's Testimony and its Importance for Gold Miners

The most important elements that can be interpreted from the Fed chair's testimony are that interest rates are not going to normalize as high and as fast as they have generally done in other recoveries, and there may not be another rate hike at all this year. These factors are undoubtedly bullish for gold, and thus, are extremely favorable for GDX going forward. To confirm the market's interpretation of Yellen's

This article was written by

Victor Dergunov profile picture
The #1 Service For Diversified Portfolio Profits

Hi, I'm Victor! It all goes back to looking at stock quotes in the old Wall St. Journal when I was a kid. What do these numbers mean, I thought? Fortunately, my uncle was a successful commodities trader on the NYMEX, and I got him to teach me how to invest. I bought my first actual stock in a company when I was 20, and the rest, as they say, is history. Over the years, some of my top investments include Apple, Tesla, Amazon, Netflix, Facebook, Google, Microsoft, Nike, JPMorgan, Bitcoin, and others.

Analyst’s Disclosure: I am/we are long GDX NEM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We are also long call options regarding GDX, GDXJ and various miners.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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