Everything you need to know about GDX vs GDXJ
If you want to invest in gold miner stocks, I suggest sticking with the GDX vs.GDXJ.
There are more differences than just smaller cap and more volatility when it comes to comparing GDX with GDXJ.
For example, the GDX describes itself as a “modified market-capitalization weighted index primarily comprised of publicly traded companies involved in the mining for gold and silver.”
Meanwhile, here’s the description of GDXJ, from their own marketing materials. “The Junior Gold Miners Index includes companies that generate at least 50% of their revenues from gold mining and/or silver mining or have mining projects with the potential to generate at least 50% of their revenues from gold and/or silver when developed.”
See that quote there about “potential to generate?” There’s much more speculation involved in the GDXJ as that whole “potential to generate” gives them a lot of leeway when they choose what stocks they’re buying for that ETF.
In the end, I pretty much stick with $GDX as I would rather stick with the best and biggest miners, not the little ones and speculatives in the $GDXJ.
So how am I looking at trading GDX, if at all, right now?
I like the GDX here again, as I think it’s likely got some momentum coming towards it and gold as equities lose some of their own momentum. Gold looks like it might finally get that pop near-term. I could $1500/oz for gold by the end of the summer. Mining co’s have been CRUSHED over the last year or two and I think they can easily get back to their 2010 highs in the next year or two.
I might add some GDX calls at some point if and when the gold rally gets more entrenched. We’ve had some wins and some losses in the past with riding long-term GDX calls, as I recall and I’m not keen on trading that asset right now.
I am looking at the $GDX call options right now and the 2016 $GDX $30 strikes at $2 ain’t a bad idea at all. I just haven’t done it yet, as I’ve been lettingGDX/Gold play out since my last trade in the sector.
I owned some calls on the $GDX for a while last year. It was a wild ride, too some partial quick profits after it spiked and then rode the remainder to mostly an ugly loss at expiration.
As for gold itself, I remind you once again that I would never want to own the GLD ETF and the paper promise of physical gold bars that come with it. It’s not like the GDX ETF which, like most ETFs, invests in stocks, and I’ve never been comfortable and never will be comfortable with a paper promise when it comes to physical gold or silver. I think we’ll look back in five years and see that the $1200 level in spot gold prices was a pretty great long-term buying opportunity. I do own gold and silver in coin and bullion form and I plan to own them forever that I’ve spent the last year or so buying and building up, slowly but surely whenever gold prices have taken a big hit.
Gold, as a topic, always causes a lot of hype, both good and bad, and I’m curious what the sentiment is out there amongst you right now. So please let me know your own thoughts on gold, miners and precious metal ETFs in the comments below or come join the ongoing discussion at Scutify.
PS. Speaking of Scutify, you can get a free copy of my #1 Amazon best-sell, Everything You Need to Know About Investing, simply by joining Scutify for free and sending me a Scuttle request.
