VanEck Gold Miners ETF (GDX) – Ready to Pop After Its 28% Jump in the Past Month

VanEck Gold Miners ETF (GDX) – Ready to Pop After Its 28% Jump in the Past Month

Gold mining companies mine, explore and refine the commodity. The price of gold mining companies and ETFs, as well as the price of gold bars, have had a rough ride over the past decade, and have been in the doldrums with no increase in value. The conventional thinking is that holding gold is an inflation hedge and a store of value.  Supposedly it will offer not only a safe haven in tough economic conditions but also offer some portfolio diversification. So far that has not turned out to be the case in 2022.

There is a difference, to investors, between buying physical gold, gold ETFs, gold miners, or their ETFs.  Miners are subject to market risk and much higher volatility, in both up and down markets.  Aggressive investors and traders may play leveraged gold miner ETFs for more action, but that is a treacherous environment where proper market timing is critical. Moreover, Gold mining ETFs are subject to a maximum long-term capital gain rate of 20%, while holders of the precious metal are subject to a 28% rate.

However, with the U.S. economy still unsettled with high-interest rates, this may be the time to jump on board, as gold tends to run in hot and cold multi-year cycles.  Think of the 1980-1981 period when gold and silver were at much higher prices when inflation was the 10% to 14%.

VectorVest subscribers were able to access a Special Report on November 25 titled “The Golden Approach” to review the selection of gold mining stocks, as well as the popular Midas Touch strategy to identify the leaders.

This ETF tracks the performance of gold and silver mining companies with a combination of small, mid-sized, and large companies. Note that VectorVest automatically assigns a 1.00 rating for both Relative Value and Relative Safety to all ETFs, as they are portfolios of stocks rather than individual securities. Also, the Earnings Per Share (EPS) and sales growth rates are set at zero for the same reason.

The critical VectorVest ratings on GDX are as follows:

• Very Good Timing: The Relative Timing (RT) rating focuses on the price trend over the short, medium, and long term. The components include price direction, dynamics, and price magnitude of price changes over daily, weekly, quarterly, and yearly comparisons. GDX has an above-average RT rating of 1.37. As the accompanying chart shows, GDX hit its 2022 high on April 18, and is well above its 50-day moving average.
• Poor Comfort Index: This index measures the consistency of a stock’s long-term resistance to severe and lengthy corrections. This indicator compares the individual stock to the fluctuation of the VectorVest Composite (VectorVest’s exclusive index of over 9,000 stocks) and is measured on a scale of 0 to 2.00. At a level of 0.62, clearly, GDX has a below-average rating.  This is not surprising as it is a volatile stock in a volatile sector.
• Good VST Score: The VST Master Indicator ranks nearly 9,200 stocks from high to low and brings to the top of the rankings those stocks with the highest VST scores. GDX’s score is above average at 1.16 and is an example of the value of using the VectorVest analysis software to find the strongest stocks in the VectorVest universe.

All things considered, with these mixed ratings is this a good time to buy GDX as it is at a critical support and resistance level? To get the answer you can analyze GDX free using VectorVest and view the current buy, sell or hold recommendation.

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