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Tuesday, December 27th, 2011
golden gifts

Of gold, frankincense, and myrrh, the only one that I can find quoted is gold.  It remains a popular gift in the form of jewelry — but the real clamoring for it the last few years has been from investors expecting its rise to continue.

Years ago if you were a “gold bug” you might have socked away some bullion or even invested in gold futures, but often you played individual gold stocks, big and small.  With the advent of ETFs came the SPDR Gold Trust (GLD, in 2004) to track the metal itself.  Then, the Market Vectors Gold Miners ETF (GDX) started trading in 2006 and its junior sister (GDXJ) was created in November of 2009, at which point the chart above begins.  (The S&P 500 is also shown.)

It’s hard to believe that the massive rally in GDXJ has been given back, but it has — and GDX lagged the S&P too.  Although GLD has had a significant correction, it and other ETFs that move directly with the price of the commodity seem to have put a permanent tarnish on the main attraction of gold stocks of yore.  They’ll now trade on valuation discrepancies as much as anything.  That’s probably why the firms are looking to increase their dividends.  The game has changed.  (Chart:  Bloomberg terminal.)