GDX Jumps 9.25% as 2.8% Gold Gain Amplifies Miners' Margins
Updated
Updated · ebc.com · Aug 24
GDX Jumps 9.25% as 2.8% Gold Gain Amplifies Miners' Margins
3 articles · Updated · ebc.com · Aug 24
Summary
On Aug. 19, VanEck Gold Miners ETF climbed 9.25%, far outpacing a 2.8% rise in U.S. gold futures and a 3.3% gain in SPDR Gold Shares.
The gap reflects operating leverage: if gold rises 10% from $4,000 to $4,400 while production costs stay at $2,500 an ounce, a miner's simplified margin expands 26.7% from $1,500 to $1,900.
GDX is not a fixed 3x gold product because it holds mining stocks, whose moves also depend on output, costs, debt, mine quality, political risk and equity valuations.
That same leverage cuts both ways: a 10% drop in gold to $3,600 would shrink the simplified margin 26.7% to $1,100, leaving miner ETFs potentially much more volatile than bullion funds.