Metals Investors: Buy GDX, Not GLD

London (July 17)  As the summer progresses, many investors with exposure in precious metals have found themselves in a quandary. Most of the traditionally bullish drivers that should be creating rallies in the SPDR Gold Trust ETF (NYSEARCA:GLD) have not had the desired impact - and the effect has been a slow-build to losses for long positions in the dominant precious metals ETF.

But viable alternatives can still be found when using the VanEck Gold Miners ETF (NYSEARCA:GDX) to express a similar stance in the commodities space. Strong earnings and lower price-to-book valuations in GDX have made the mining sector look much more attractive when viewed in comparison to the “standard” precious metals instruments. All told, it looks as though the time is right to pull the trigger on new long positions in GDX in anticipation of post-summer rallies in the months ahead.

In recent months, gold prices have held below $1,300 in situations where bond yields have fallen and stock markets were hit with selling pressure from investors. Historically, the conventional wisdom has told us that gold prices should experience an inversely-correlated relationship to these asset classes (which means instruments like GLD should have rallied).

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