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The VanEck Gold Miners ETF (NYSEARCA:GDX) has lost 18% since its May peak, more than double the loss seen in gold prices over this time. Downside momentum appears to be building in gold since its failure to hold on to the $2,000
GDX: Crash Risks Rising As Cash Crunch Intensifies
Summary
- The VanEck Gold Miners ETF has lost 18% since May, with downside momentum building in gold since it failed to maintain the $2,000 level. Free cash flows from their 2021 peak, indicating a potential further crash in the GDX.
- The GDX ETF tracks the NYSE Arca Gold Mining Index. The ETF's already low yield of 1.6% is at risk of declining as free cash flows across the sector continue to dry up.
- The gold mining sector's balance sheet is healthier than in 2015, but the prospect of negative free cash flows, falling dividends per share, and a rise in equity issuance could lead to a crash in the GDX.
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 a beneficial short position in the shares of GDX 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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