The ETF of the big Gold miners is currently showing relative weakness against the gold price which suggests gold bug skepticism about getting their long anticipated rally anytime soon. The overall trend over the past 2 years has been very similar, so why contemplate buying Gold miners rather than Gold bullion or a Gold ETF like GLD? We'll Gold stocks do tend to be LEVERAGED to the Gold price and likely move X2 the Gold price when the Gold price breaks out of its trading range.

So whilst the gold price and GDX have been in a 5 year trading range. Nevertheless when the breakout eventually happens Gold stocks should rise at a faster pace than the Gold price for the fundamental reason the stocks become more profitable i.e. Big cap gold stocks operating costs (AISC) at an average of $1000 per ounce of Gold mined. So at $1300 their profit is a healthy $300 per ounce, whilst at $1400 profit jumps by 33% to $400, hence leverage to the Gold price.

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Nadeem Walayat

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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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