GDXU And The Gold Boom: Timing Is Critical When Turbocharging Mining Stocks

seekingalpha05-21

Gold reached a new high of $2,454.20 on the June COMEX futures contract on May 20.Gold mining shares operate on a leveraged model and can outperform gold on the upside and underperform when the price ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGDXU And The Gold Boom: Timing Is Critical When Turbocharging Mining Stocks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-21 02:18 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694588-gdxu-and-the-gold-boom-timing-is-critical-when-turbocharging-mining-stocks><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Gold reached a new high of $2,454.20 on the June COMEX futures contract on May 20.Gold mining shares operate on a leveraged model and can outperform gold on the upside and underperform when the price ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694588-gdxu-and-the-gold-boom-timing-is-critical-when-turbocharging-mining-stocks\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FDN","symbol_name":"First Trust Dow Jones Internet I","start_time":0,"source_url":"https://seekingalpha.com/article/4694588-gdxu-and-the-gold-boom-timing-is-critical-when-turbocharging-mining-stocks","article_id":"2437485067","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/157770370/image_157770370.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2437485067","pubTimestamp":1716229095,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Gold reached a new high of $2,454.20 on the June COMEX futures contract on May 20.Gold mining shares operate on a leveraged model and can outperform gold on the upside and underperform when the price ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FDN":"First Trust Dow Jones Internet I","BK4585":"ETF&股票定投概念","BK6086":"黄金","GDX":"黄金矿业ETF-VanEck","GDXJ":"小型黄金矿业ETF(Market Vectors)","BK4550":"红杉资本持仓","BK4588":"碎股","GDXU":"MicroSectors Gold Miners 3x Leveraged ETN","BK6507":"矿产资源股","5TP.SI":"中色金矿"},"translate_title":"GDXU和黄金繁荣：矿业股上涨的时机至关重要","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GDX":1,"GDXJ":1,"GDXU":1,"5TP.SI":0.9,"FDN":0.9,"HGmain":0.88},"content_text":"Gold reached a new high of $2,454.20 on the June COMEX futures contract on May 20.Gold mining shares operate on a leveraged model and can outperform gold on the upside and underperform when the price falls.Economic and geopolitical factors support a continuation of rising gold prices, making it a safe-haven asset.GDXU is a leveraged ETN that requires careful attention to risk-reward dynamics.   LockieCurrieAs it has done so many times in the bull market that began in 1999 at the $252.50 low, gold reached a new $2,454.20 high on the June COMEX futures contract on May 20. The June contract reached $2,448.80 on April 12, and corrected to just over the $2,285 level on May 3, where it found a bottom and rallied to a new and higher record peak on May 20. Gold mining shares operate on a leveraged model so can outperform gold on the upside and underperform when the price falls. Miners invest significant capital in gold exploration and mining projects, making prospecting and extracting gold ores from the earth’s crust a leveraged operation. Understanding this concept can empower investors in their decision-making process. The VanEck Gold Miners ETF (GDX) owns shares in many of the leading senior established gold mining companies. The VanEck Junior Gold Miners ETF (GDXJ) owns shares in the even more leveraged junior companies that explore for gold reserves. The MicroSectors Gold Miners 3X ETN (NYSEARCA:GDXU) provides even more leverage as it has exposure to GDX and GDXJ and turbocharges their performance. While GDX and GDXJ provide leverage, they do not have the gearing that causes time decay. GDXU offers triple exposure to the senior and gold mining ETFs, making risk-reward dynamics critical. Therefore, time and price stops are required when trading GDXU, as time decay is a component of the turbocharged ETN product. Gold corrects, gold bounces, and the bull market remains intact COMEX June gold futures reached their latest record high on May 20 at $2,454.20 per ounce.   Six-Month COMEX Gold Futures Chart (Barchart)As the six-month chart highlights, gold futures continue to make higher lows and higher highs. The most recent rally took June gold 7.4% higher from the May 3 $2,285.20 low to the $2,454.20 May 20 high.   Long-Term Chart of COMEX Gold Futures (Barchart)The long-term chart dating back to the 1970s shows every downside correction since the turn of this century has been a buying opportunity, leading to a new record high. Gold mining shares will benefit from higher gold prices The companies that explore for and extract gold from the earth’s crust move higher and lower with gold prices. The bull market in gold has caused many investors to purchase gold mining stocks as higher gold prices tend to increase earnings. Moreover, rising gold prices allow exploration and production companies to pursue projects with lower-grade ores and higher production costs. Rising inflation, supporting higher gold prices, increases production costs as energy, labor, equipment, and other expenses rise. While gold mining companies face higher costs, the rise in the metal’s price is compensation. The economic and geopolitical landscapes favor higher highs for the leading precious metal Gold remains the world’s oldest means of exchange, dating back thousands of years. While the technical trend since 1999 remains bullish, economic and geopolitical factors support a continuation of rising gold prices.  Central banks have been buying gold over the past few years, increasing their reserves. Gold is integral to many countries’ foreign currency reserves, validating its role in the global financial system. China and Russia have been leading gold buyers and have increased reserves by vacuuming into domestic production. Investors have increased gold purchases. Recent data from retailers like Costco show that gold and silver offers have often quickly sold out. The decline in the full faith and credit in countries that issue fiat currency has boosted gold’s value. While the global foreign currency markets value one currency versus others, all currencies have lost value against gold over the past decades. Gold is a safe-haven asset that tends to rally during geopolitical turmoil. Wars in Ukraine and the Middle East, and the deterioration of relations between the U.S. and China have been bullish on gold. The U.S. dollar has been the world’s reserve currency for nearly a century. After Russia invaded Ukraine, economic sanctions on Russia have caused Russian allies and other countries to reduce their reliance on the U.S. dollar for cross-border transactions and currency reserves. The potential for a BRICS currency with gold backing could further derail the dollar’s role in the international financial system while increasing gold’s role as the ultimate foreign exchange instrument. U.S. and global inflationary pressures are bullish for gold and other commodity prices.  The bottom line is that there is a compelling case for higher gold prices and a continuation of the quarter-century rally in May 2024. Gold mining shares need to catch up While gold mining shares offer exposure to the metal, they have underperformed gold over the past years. The price action in the VanEck Gold Miners ETF (GDX) has been disappointing compared to the path of least resistance of the metal.   Long-Term Chart of the GDX Gold Mining ETF (Barchart)The chart shows that GDX reached a record high in September 2011 at $66.98 per share when nearby gold futures rallied to $1,911.40 per ounce. At over the $2,425 level on May 20, gold was around 27% higher, while the GDX was 44.4% lower at $37.21 per share. The price action in the VanEck Junior Gold Miners ETF (GDXJ) has been equally disappointing.   Kong-Term, Chart of the GDXJ Gold Mining ETF (Barchart)The chart highlights that GDXJ at $46.97 per share on May 20 was 73.8% lower than the December 2010 record $179.44 per share high. Gold exploration and mining is a highly speculative business that has left many investors and traders with disappointing returns compared to owning the metal. The bottom line is the gold mining shares have the potential for lots of catching up, given gold’s bullish trend and performance. The GDX and GDXJ are unleveraged ETF’s, while time decay has not been a factor in the underperformance, the exploration and mining business costs have increased, eating away at margins. However, as gold continues to make higher highs, the potential for a sudden rally as trend-following traders and investors flock to mining companies could turbocharge GDX and GDXJ’s performance if the bullish price action continues to take gold prices to new highs. GDXU is a leveraged ETN: The difference between ETFs and ETNs, timing and risk-reward dynamics are critical Market participants believing that the gold mining business offers compelling value, with a significant price adjustment on the immediate horizon, can turn to the MicroSectors Gold Miners 3X ETN product (GDXU) for short-term long trading risk positions. GDXU’s top holdings include:   Top Holdings of the Leveraged GDXU ETF Product (Seeking Alpha)The chart shows that GDXU owns a leveraged position in GDX and GDXJ. At $47.81 per share on May 20, GDXU had $356.73 million in assets under management. GDXU trades an average of over 825,000 shares daily and charges a 0.95% management fee. GDX and GDXJ are ETFs, meaning they invest in senior and junior gold mining company shares. Investors in GDX and GDXJ receive direct exposure to the mining shares. GDXU is an ETN, an unsecured debt note issued by the Bank of Montreal. GDXU is not a medium or long-term “buy and hold” investment product as it seeks returns for a single day. Investors and traders must understand that they should not expect a leveraged return of the ETN’s cumulative return for periods greater than a day. While GDXU experiences significant time decay, it can be a valuable day-to-day trading tool for market participants seeking a sudden recovery in gold mining shares via the GDX and GDXJ ETF products. As an ETN, GDXU also has the added risk of an issuer (The Bank of Montreal) default.  The bull market in gold continues to take the price to higher lows and record highs. It may not be long before gold exploration and mining stocks and the GDX and GDXJ ETFs catch up with the metal after a long underperformance period. GDXU is a short-term tool that can enhance mining share exposure returns, but timing and discipline with stops and profit targets are critical factors for success.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2437485067"}