VanEck Vectors Gold Miners (GDX) is one way for traders to gain exposure to the price of gold. Before you buy or short this ETF, however, you should understand what it tracks, some key statistics and why some traders prefer it to alternatives that hold the precious metal itself.
VanEck Vectors Gold Miners ETF aims to replicate the price and yield performance of the NYSE Arca Gold Miners Index, before fees and expenses. To track that index, the fund invests virtually all of its assets in mining stocks that are part of the index.
Some traders prefer to hold miners rather than ETFs like the SPDR Gold Shares (GLD) that track the price of gold itself because the miners react more sharply than the metal, making it easier to capture a trend in either direction by holding mining companies than by holding gold.
GDX currently has roughly $8 billion in total net assets and charges an annual net expense ratio of 0.51 percent.
VanEck Vectors Gold Miners has 52.6 percent of its assets invested in Canada, 16.7 percent in domestic stocks, 13.3 percent in Australia and roughly 6 percent both in the United Kingdom and South Africa. As a result, it’s appropriate as a diversification play for investors whose portfolio is heavy on domestic issues.
Because GDX owns gold-mining companies, the price of gold affects the earnings potential of the stocks. Consequently, if there’s a fall in gold prices, GDX tends to fall; the opposite is true when gold prices rise.
Here’s a look at the VanEck Vectors Gold Miners ETF on the daily chart, with the SPDR Gold Trust (GLD), which tracks the price movements of gold bullion.
While not identical, the price movements are pretty similar.
That in mind, if you’re looking to gain exposure to gold, as well as Canada gold-mining stocks, the GDX could serve as a cost-effective alternative to holding gold or gold ETFs.
Jeff Bishop is lead trader at TopStockPicks.com. He runs short-term trading strategies, using stocks, options and leveraged ETFs.