Gold Stocks Marching to Their Own Drummer (GLD, GDX)

drummerThe gold/gold stock ratio scored an interim low Monday as the broader equities indexes made large gains.

Bullion, represented by the SPDR Gold Shares Trust (NYSE: GLD), just couldn’t keep up with the stocks comprising the Market Vectors Gold Miners Index ETF (NYSE: GDX). GDX shares shot up 6% by Monday’s close, while the GLD trust ended the day with less than a 2% gain

With its 3.4% gain, the broad-based S&P 500 stock index covered only half the ground taken by miners. That’s not surprising when you think about it. After all, there are a lot more stocks in the blue-chip index; only 28 issues make up the GDX portfolio.

Despite the apparent outsized volatility of gold stocks Monday, miners have actually been less risky than the broader market this year. Compare the performance of the miners ETF to the S&P 500-tracking S&P Depository Receipts (NYSE: SPY): SPDRs only turned positive for the year on Monday’s action, eking out a 0.7% gain. Year-to-date, GDX is up 3.4%, and has at one point been up as much as 14%.

Those gains have been realized with vastly disparate risks. The standard deviation of daily returns for the S&P tracker is one and a half times greater than the gold stock ETF’s.

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