Gold Stocks (GDX) Surge to New High

Gold stocks rallied Tuesday, as the Market Vectors Gold Miners ETF (GDX) rose to a new all-time record high alongside the yellow metal.  The GDX climbed 2.1% to $66.29 per share while gold futures reached $1,923.70 per ounce before paring their gains.  Strength in gold stocks and the GDX was fueled by a further rise in risk aversion on Wall Street, stemming from recession concerns in the U.S. and euro zone.  The S&P/TSX Global Gold Index, Canada’s leading composite of gold stocks, climbed 2.5% to 445.33 alongside the GDX.

With today’s rally in gold stocks, the GDX extended its year-to-date gain to 7.5%.  However, the gold stocks ETF continues to lag the price of gold – which has climbed 35.3% in 2011.  Given the GDX’s underperformance, several investors have recently predicted that gold stocks will soon begin to play catch up to the yellow metal.

In yesterday’s Financial Times, long-time investor Jim Slater presented his bullish case for gold stocks.  In an article entitled Gold miners will soon feel the bullion effect, Slater contended that “the arguments for buying gold have never been stronger.  Gold is increasingly accepted as a currency and haven.  Unlike other currencies, gold has no debt. Central banks have switched from being net sellers to large buyers.”