GDX - The New ETF For Precious Metals Stocks

GDX - The New ETF For Precious Metals Stocks
Jack Chan

www.traderscorporation.com

The much anticipated and much needed new ETF for precious metals stocks has finally debuted on 5/22, without much fanfare. In fact, there is very little info on the web. Reason is obvious, gold bulls are not in a celebratory mood these past few days. Our Canadian subscribers have been blessed with access to a PM stock ETF for a few years now, the XGD.TO is an excellent trading vehicle for us. Now US subscribers also has easy access to the gold and silver sector without owning a basket of stocks. GDX is not the same as GLD, which tracks the price of gold and not gold stocks. For those who are unfamiliar with GDX, here is the run down:

ETF symbol: GDX
Price on May 22nd: $36.50 U.S.
Options available.
Index symbol: The ETF tracks the AMEX Gold Miners Index: $GDM
Number of holdings in the Index: 43 international gold and silver stocks listed on AMEX.
Specialist handling order flow: Goldman Sachs
Sponsor: Van Eck Global
MER: 0.55%
More information: www.vaneck.com

Top ten holdings in the Index as of April 30th

Stock
Newmont Mining
Barrick Gold
AngloGold Ashanti
Goldcorp
Gold Fields
Freeport-McMoran
Glamis Gold
Harmony Gold
Kinross Gold
Buenaventura Weight (%)
13.51
8.50
7.51
6.53
6.50
6.16
4.97
4.37
4.06
3.72

Requirements for inclusion in the Index

Listed on AMEX
Traded over the past six months on average daily volume of at least 50,000 shares
Market cap exceeding $100 million
Involved primarily in gold and silver mining.

GDX - currently on a sell signal. Prices are approaching 200ema support where we will be watching for a BSBS, may take a while as base building is necessary after such a steep decline.

Our subscribers are familiar with the $GDM index, it is our "chart of the year". We've been tracking this index simply because neither the $HUI nor $XAU represent PM stocks justly. The breakout on this multi year "cup with handle" has very bullish implications for the long term. However, it is quite possible that the breakout point at 800 could be tested sooner or later, which is still over 20% below current prices.

Summary

This new ETF fills the void for precious metal stocks investors and traders. Well diversified and more accessible than a fund, it is excellent for short term trading as well as investing. It has a higher beta than the $XAU but lower than $HUI. The timing of the debut is unfortunate, and volume clearly is lacking at this point. There are tradable options but volume is non existent so far. GDX is now on our roster of funds and ETFs, watch and wait for the next signal.

Jack Chan at www.traderscorporation.com
24 May 2006