Gold Miners: GDX, GDXJ

jamesmith

oda 发表于 2013-8-21 07:35 PM
Hi LaoDa, when will you update GDX , I see FXC is riding the downtrend, and why DUST re-organized  ...

Hi, I am not laoda, I am a HTer learning how to invest.

I have been thinking about GDX and GDXJ positions recently, the investment is made based on general cheapness condition of miners, if I have no particular view on future of gold prices, I should be selling them when the cheapness condition is gone. To find out if this is the case, I need to look at individual mining companies and access a good number of them to get an idea. I will try to post something when I think I learned more about them...

is FXC the Canadian dollar trust? DUST is the gold miner bear fund? I really don't know much about them...

jamesmith

So the FED is not tapering yet, its not so easy to cut/stop the money printing...let's wait and see where gold and miner goes...while we are waiting...we can look at another way to value gold miners, it is to look at them as long dated call options on gold.
strike = cost of producing gold from mining operation
contract size = amount of reserve miner owns
expiry = lifetime of the mine
notional = present value of the miners gold reserve

We can plug these into Black Scholes formula to backout the premium for this option.

jamesmith

Wanted to write about miners but I didn't buy more or sold existing positions of GDX and GDXJ, so I will just post two charts, gold and gold miners index. Miners could go up and down a lot with relatively small movements of gold, what ultimately matters is price of gold and cost of mining and quality of underground reserve.

lilitulip

jamesmith

added some position to GDX and GDXJ last week, still for the same reasons, miners in general are cheap and eventually they will revert to the mean. What is interesting is that silver dropped much more than gold, it would be interesting to look into silver miners as well. Many said silver is poor man's gold, but silver also has a much larger industrial demand compared to gold.

lilitulip

jamesmith 发表于 2014-2-3 01:18 PM
added some position to GDX and GDXJ last week, still for the same reasons, miners in general are che ...

you don't think when silver drop more, means people not rush to take risk on precious metal?

jamesmith

lilitulip 发表于 2014-2-3 03:44 PM
you don't think when silver drop more, means people not rush to take risk on precious metal?

I try not to guess what people think, mainly because I suck at it.
silver historically has been poor man's gold, it has some correlation to gold and is more volatile, which makes it a better trading vehicle.

I don't believe FED can just stop QE and raise interest with no consequence, "Only when the tide goes out do you discover who's been swimming naked." - Warren Buffett
All these stimulus money, I don't know when but inflation is definitely coming...

I am still holding my mining position, might add more exposure in the near future. They still remain relatively small position, I am much more interested in buying awesome businesses at attractive prices :)