The VanEck Gold Miners ETF (GDX) has been in a relentless bull run this year and is trading at its all-time high. GDX was trading at $80, up by 135% from its January lows and
The ETF has jumped in the last ten consecutive weeks, its longest streak on record. This surge has brought its total assets to over $23 billion, even as it experienced net outflows of over $3 billion.
This article explores why gold mining stocks are rising and whether it’s too late to buy it.
Gold mining stocks have jumped as gold price has soared
The GDX ETF has been in a strong bull run this year, helped by the ongoing gold price rally. Gold was trading at $4,030 on Thursday after soaring by over 50% from its lowest level this year. It has jumped by 110% in the last five years.
Gold has jumped for several reasons. First, Wall Street analysts have been highly bullish on gold this year, with most of them boosting their estimates as it continued rising.
Bank of America boosted the estimate to $4,000, while Goldman Sachs and Citigroup have maintained that it has more upside in the coming months.
Second, gold price has jumped this year because of the ongoing accumulation by foreign central banks, especially China, as they viewed the US dollar as an unreliable reserve currency. Recent data shows that gold holdings by central banks have flipped those of US dollar.
Third, Donald Trump’s policies have continued to have a positive impact on gold. These policies include his attacks on the Federal Reserve, tariffs, and the Big Beautiful Bill, which is expected to boost the budget deficit. On the positive side, independent entities expect that the tariff revenue will help to limit its impact.
Additionally, gold price has continued to serve its inflation hedge purpose in the market. Inflation has remained stubbornly high in the past few months. The most recent report showed that the headline Consumer Price Index (CPI) rose to 2.9% in August, while the core CPI has moved to 3.1%.
Gold price has also thrived now that the Federal Reserve has started to cut interest rates this year. It slashed rates by 0.25% to between 4.00% and 4.25% and officials pointed to more cuts in the near term.
Is the GDX ETF stock a good buy today?
The GDX ETF stock price has been in a strong uptrend this year, with many gold mining stocks firing on all cylinders.
Agnico Eagle stock price has jumped by 113% this year, while other top mining companies like Barrick Gold, Newmont, and Zijin Mining have soared by over 134%. These stocks have done better than gold as investors anticipate strong returns.
However, there are risks of buying the GDX ETF at its record level. The first main risk is that gold could suffer a pullback in the next few months as investors start to book profits.
Another risk is that gold mining companies have not always been the best allocators of capital. A good example is when gold mining stocks plunged by over 79% from its highest level in 2011 to its lowest point in 2015. In a note, an analyst told the FT that:
“A lot of value was destroyed. In investors’ minds, it’s still fresh. The mistakes these companies made in the previous cycle, and some scepticism, will those mistakes happen again?”
The other risk is that the ongoing gold price rally is also due to the government shutdown, which has affected operations in Washington. As such, there is also a risk of a reversal when the shutdown ends.
GDX ETF stock | Source: TradingView
Technicals also suggest that the GDX ETF will retreat in the coming weeks. For one, the fund has become highly overbought as the Relative Strength Index has jumped to 83 and the Stochastic Oscillator has moved to nearly 100. Also, the stock is approaching the overbought level of the Murrey Math Lines tool.
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