Wednesday, May 9, 2012

gold stocks versus the world

below are some charts of $GDM (the index underlying the GDX ETF) relative to world equity indexes -- Dow Jones World, S&P 500, MSCI Emerging Markets, and MSCI EAFE.
yesterday I bought in-the-money calls on GDX, thinking the miners are set up for a good countertrend bounce. (maybe to ~50.) now looking at these long-term ratios I see that potential even if (especially if?) the broader markets continue to falter. I don't even think bullion pricing matters much here.
realize, I've been skeptical of gold mining stocks for quite some time (somewhat justified by the relative price action lately), and after the forecasted rally I'm likely to move back into the neutral or bearish camp, but countertrend rallies make for good trades; they offer large percentage returns over short holding periods.
update 5/24/12: I closed the long position in GDX when the price popped above 45 in early trading this morning. ended up a decent flip.