Sell Gold Miners (GDX:arcx)
Our new macro theme published by Steen Jakobsen predicts a stronger USD going forward as the Fed is moving closer to hiking rates as most inflation metrics followed by the Fed are either close to 2% or slightly above. The US labour market is also close to full employment, so further inflationary pressures should be on the horizon.
In addition employment growth looks robust and US stock market is close to all-time-highs. If this theme plays out as we think it will spells short-term opportunities on the short side in gold miners.
As a result we are initiating a short position in gold miners through the most liquid ETF – VanEck Vectors Gold Miners ETF (GDX:arcx). The position is added with a stop at $31.50 with a profit target around the $25 level.
Gold has this year gained strength as investors sought protection against correlated assets but also as the ultimate safe-haven against what looks like extended valuation across many different asset classes. But a strong underlying force among investors is the hunt for yields which could again hurt gold as the asset has a negative carry dragging down portfolios with already low indicated yields.
Yours sincerely,
Peter Garnry, CFA | Head of Equity Strategy
