GDX: Extremely Overvalued Even At These High Gold Prices

Mar. 28, 2023 4:33 AM ETVanEck Gold Miners ETF (GDX)GDX38 Comments
Stuart Allsopp
6.88K Followers

Summary

  • VanEck Vectors Gold Miners ETF has benefitted from the rise in gold prices over the past few weeks, but even at these high gold prices, gold miners are extremely overvalued.
  • Even with an expected earnings increase of 28% over the next 12 months, the forward PE ratio is 22.5x, and free cash flows continue to underperform to a large extent.
  • Even as rising inflation has put persistent downside pressure on real gold prices, the metal is trading far above where its correlation with real yields would suggest.
  • A downward reversal in gold appears to be taking shape, which could result in a sharp decline in the GDX in the near term.

Open Cut Gold Mine

mikulas1

The VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) has benefitted from the rise in gold prices over the past few weeks amid the sharp drop in interest rate expectations. However, even at current gold prices the GDX is overvalued, and gold prices

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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.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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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