Discussion in 'ETFs' started by moonlightxpress, Nov 6, 2009.
gold is reaching highs while gdx is not..what gives?
Going up over 10% in one week isn't enough for ya?
There is more perceived risk with anything paper than the actual metal. You have to own the metal. The stocks that make up gdx can easily be manipulated but the actual metal has real supply and demand. Metal futures can be sold by anyone or bank or fed trying to make the dollar look good, by temporarily and artificially driving the price down, but the actual price of the metal will be stronger just because of its limited supply. In the spring of 2008 when gold hit a high of 1030, I believe this is when Bear Sterns went under, you couldn't buy gold for even $100 over spot. There wasn't any available. I remember seeing quotes on Bullion Direct for Buffalo Heads for $1250. That was the cheapest anyone would sell them for at that time.
gdx was at its high when gold was around 1050, now gold is close to 1100 and gdx is like 2 off its lows, thats a pretty big disparity..i will play on the short side on this etf..
That's probably not a bad idea. When gold is making new highs and GDX is not, then that should tell you something. The only problem with that is that there is always the chance that gold goes parabolic like it did in the 80's which would take GDX for a ride also.
I have also been watching the divergence between GLD and GDX. Another significant divergence is that between Gold and Silver (GLD, SLV). I believe this divergence is not healthy for the future price of gold. Time will be the judge.
draw your conclusions
We all know that Gold and Silver are both precious metals. However, you can consider Silver as an industrial metal because of its use in many consumer products.
Investors in the past used Gold as a hedge against inflation or as a safe haven in certain economic conditions. There are two things to mention about that statement. First, there is no inflation. Second, the government says that we are in a recovery and have come out of a recession, therefore no need for a safe haven.
Why is Gold making higher highs? That is the million-dollar question! Personally, I believe it is purely a Dollar play. As the Dollar falls, all commodities rise.
To back-up my comments in my last post, Gold is pushing higher purely due to the weak dollar. However, Silver has not been as strong, indicating the recovery may not be as strong as the media and government would like us to believe, due to its industrial use.
As GDX goes, the weakness relative to the price of Gold indicates potential weakness in the cash price of Gold itself. If the future looks so bright for the price of Gold, would you think the miners would be matching the higher highs as Gold to confirm the conviction that Gold Cash Price is heading even higher.
I am not a fundamental trader or analyst, however, there are my fundamental reasons backing my technical analysis. My fundamental analysis may be incorrect, which I am not too concerned. I want to be right in the outcome. I have made some miscues in my Gold recommendations and I am on the sideline right now. However, I will be watching Gold closely due to the non-confirmations in GDX and Silver.
Thanks for your push to explain my convictions. It keeps me from making flippant comments without thinking through why I posted what I posted. It holds my feet to the fire!
Not sure how much correlation you can make between the miners and the price of gold, similar to crude and oil stocks (say USO versus XLE or CL/XLE)
i have been scalping gdx on the short side after the morning run up and its been profitable so far..i wouldnt dare short overnight yet on this sucker..
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