The VanEck Vectors Gold Miners ETF (NYSEArca: GDX), the largest gold miners exchange traded fund, is up more than 6% year-to-date, but over the past month, that gain is closer to 9%, underscoring the recent strength in gold miners equities. Some market observers believe that strength can continue over the near-term.
Investors have seen government policy on both the monetary and fiscal side, such as interest rates, money supply, tax, regulations and spending, affect the outlook for gold prices. An overarching theme in recent months has been the trade wars as the U.S. and China make up 40% of global GDP. Meanwhile, with the economy slowing and the Federal Reserve easing up on interest rate hikes, more investors are warming up to gold for a safety play to hedge any further risks down the road.
“Following the bear market low, a sharp rally begins that lasts only six to twelve months. Then the market endures a significant correction that lasts a minimum of 18 months and ends with a breakdown to new lows (which ends up being a false move),” according to ETF Daily News.
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.
Good News For Gold
Gold prices have been steady this year amid expectations for a weaker U.S. dollar and that the Federal Reserve will slow its pace of interest rate increases. Those scenarios are benefiting gold miners and ETFs such as GDX.
As the market environment shifts, some analysts believe that the depressing influences on gold that occurred during the before the last quarter of 2018 will not likely be repeated in 2019. Furthermore, gold will see continued investment demand among the emerging markets, along with increased demand for safe-haven plays across developed markets.
“Last week we asked the question whether gold stocks would correct or consolidate in a bullish fashion. The evidence now favors a bullish consolidation. As a result, we are looking at potential near-term upside targets of $1350-$1360 for Gold, $25 for GDX,” reports ETF Daily News.
GDX currently resides around $23.
For more information on the gold market, visit our gold category.