• Loading up on Gold Miners

    by  • October 24, 2012 11:18 am • Breaking News, Broad Market Analysis, Quick Hits • 0 Comments

    Knowing seasonal trends is an important aspect of successful investing. Knowing what is ahead of the curve is analogous to avoiding unnecessary risk.

    November is an important month for Gold and specifically those companies who mine the precious yellow metal. Whether it be religious festivals in India (World’s largest buyer) or increased demand from Russia as they diversify foreign reserves.

    Over the past decade gold demand has tended to increase this time of the year and this increased demand has stoked the investment returns of those companies engaged in the extraction of.

    As the table below illustrates, November is by far the most compelling month to be exposed to this sector, as the GDX (Van Eck Gold Miners etf) and GLD (SPDR Gold trust etf) handily outperform investment returns for other months of the year. Silver or the SLV (iShares Silver trust), also get into the act as November is the second best performing month for SLV components.


    From a contrarian perspective, and also noteworthy as tailwind for the GDX is the elevated level of short interest on the exchange traded fund at this time. Total short interest on the GDX is at 20-month highs as short sellers bet against the etf. Any covering from this bearishly positioned group could provide additional buying demand in addition to the seasonality concerns cited above.

     Chart courtesy of Thomson Reuters

    An additional layer of support in the near term (ideal entry point) for a GDX trade appears to be just above 50, as this level is home to the peak November Put Open Interest at the 50 strike. Often times, inordinate levels of Open Interest tend to act as either support (puts) or resistance (calls).

    More information on GDX and its component equities can be found here http://www.vaneck.com/funds/GDX.aspx?redirectVE=generic

    More information on GLD and its component equities can be found here https://www.spdrs.com/product/fund.seam?ticker=GLD

    More information on SLV and its component equities can be found at http://us.ishares.com/product_info/fund/overview/SLV.htm


    I can also be followed on Twitter, https://twitter.com/ChrisPrybal




    Chris Prybal is a Quantitative Analyst who contributes fundamental, technical, and sentiment research as well as analysis to SchaeffersResearch.com. Chris holds a Bachelor’s degree in Finance from the University of Cincinnati and his research has been quoted on Bloomberg TV, CNBC, Barron’s and Forbes Magazine. Chris has analyzed and traded derivatives for over 15 years in addition to his research prowess. Chris can be followed on Twitter @ChrisPrybal


    Leave a Reply