The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest exchange traded fund dedicated to gold mining stocks, is sporting a fourth-quarter loss of 7.5%. Some traders think the benchmark gold miners fund could see more declines.
GDX is comprised of global gold miners, with a notable tilt toward Canadian and U.S. mining companies. Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens. However, GDX has been drawing bearish options bets.
“Specifically, the 10-day moving average of GDX’s put/call skew on 5% out-of-the-money (OOTM) options – which compares implied volatility (IV) readings for OOTM puts against OOTM calls — has skyrocketed by more than 20% over the past 20 sessions, and stands at its highest point since December 2014,” reports Schaeffer’s Investment Research.
Inflation could serve as a catalyst for the yellow metal and for gold-related ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.
Another possible catalyst for gold entering the back of the year is lingering debate surrounding how many times the Fed can raise rates, especially if the tax reform bill goes through and triggers faster growth.