GDXJ: Weakness Is An Overreaction To Fed Hike Fears

Stuart Allsopp profile picture
Stuart Allsopp
4.02K Followers

Summary

  • The rise in real bond yields over the past few weeks has kicked the legs from under the gold price recovery in place since March last year.
  • The VanEck Vectors Junior Gold Miners ETF (GDXJ) is now down 45% from its August 2020 peak, and back below pre-Covid levels.
  • Such weakness has come despite gold rising over this period, which has left the GDXJ trading at deeply depressed valuation levels.
  • The recent rise in real government bond yields is likely to prove temporary as equity market concerns force the Fed to keep policy loose despite elevated inflation.
  • This should allow the long-term gold bull market to continue, which should result in strong returns for the GDXJ given its long-term trend of outperformance during periods of gold upside.
Gold nuggets on black background.

scyther5/iStock via Getty Images

The rise in real bond yields over the past few weeks has kicked the legs from under the gold price recovery in place since March last year. Gold mining stocks have been hit particularly hard, with the VanEck Vectors Junior Gold Miners

This article was written by

Stuart Allsopp profile picture
4.02K Followers
I am a full-time investor and owner of Icon Economics - a macro research company focussed on providing contrarian investment ideas across FX, Equities, and Fixed Income based on Austrian economic theory. Formerly Head of Financial Markets at Fitch Solutions, I have 15 years of experience investing and analysing Asian and Global markets.

Disclosure: I/we have a beneficial long position in the shares of GDXJ either through stock ownership, options, or other derivatives. 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.

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