Good morning GoldBuzzers, and Happy Tuesday!

GDX is up 105% in 12 months. Physical gold? 57%.

In today’s Company Corner, I'll be examining why mining ETFs are different from the paper gold products that keep you up at night - and why institutional money just pumped over half a billion into this sector while retail investors were selling.

Ok, let's dive in.

Gold Still Dances Around $4K While Silver Flirts With $50: Another Day of "Will They, Won't They?" With The Fed

Gold dipped late on Monday to close at $4,045 per ounce, still hovering around that psychological $4,000 mark, just as Silver can’t make up its mind whether to make a clean break above $50 and hold it.

The metals have been essentially frozen in place ahead of Wednesday's Fed minutes and Thursday's delayed jobs report (thanks, government shutdown!). With markets now pricing just a 46% chance of a December rate cut versus over 60% earlier this month, traders are more nervous than a long-tailed cat in a room full of rocking chairs.

But hey, if we zoom out and look at the big picture - gold's up 55% year-to-date, tracking for its best year since disco was king in 1979. Not too shabby for our little "barbarous relic!"

I’ve had a few people contact me to say that they’re concerned about holding gold ETFs, like GDX and GDXJ, in light of what I said at the end of Sunday’s Deep Dive feature.

Let me clarify what I meant by this. I think it's fair to say that most of us GoldBuzzers tend to be a little skeptical of promises made by authorities in general.

What happens if there's a major liquidity event that affects the ability of major gold markets to deliver physical gold? What happens to ETFs like GLD when the music stops and everyone wants their gold at once?

Look, the chances of that happening might be small, but they're definitely not zero. And when the whole point of owning gold is insurance against system failure, "probably fine" isn't exactly reassuring.

That's why so many of us live by "If you don't hold it, you don't own it." I get it. I really do. When it comes to ETFs that claim to hold physical gold in some vault you'll never see, controlled by the same banks we're trying to protect ourselves against... yeah, the skepticism is justified.

GLD and SLV can work as trading vehicles or short-term holds, but if you're worried about counterparty risk, they shouldn't be your foundation.

But the thing is - mining ETFs like GDX are completely different animals. You're not buying paper promises of gold bars in JPMorgan's vault. You're buying actual shares in actual companies with actual mines, equipment, and cash flows. If COMEX implodes tomorrow, Newmont and Barrick still own their mines. They still pull gold out of the ground. They can still sell it to whoever's buying - Shanghai, Dubai, direct to refiners, whoever.

That's the difference. Mining stocks aren't derivatives or promises - they're ownership stakes in real businesses with real assets.

GDX is the VanEck Gold Miners ETF - basically a fund that owns all the big gold mining companies for you (45 holdings today). It closed Monday at $74.95 per share, up 121% YTD and 105% over the past 12 months.

Yeah, you read that right. While gold itself is up over 57% in 12 months, GDX has absolutely crushed it. Almost double the returns and is going toe-to-toe with the junior miner ETF, GDXJ, which I analyzed a couple of weeks back.

Why? Because miners have that beautiful thing called operating leverage. Their costs to dig gold out of the ground stay pretty much the same whether gold is $2,000 or $4,000 an ounce. So when gold rallies, their profits explode. It's like printing money, except legally.

I like to look at percentage price comparisons, rather than just price itself and I put together the chart above to show Gold vs GDX and GDXJ in percentage increase over the past 10 years.

You can see that both GDX and GDXJ have significantly outperformed Gold, with GDX coming out narrowly on top. Both GDX and GDXJ go up much more quickly, and down much more quickly, then Gold itself.

GDX currently owns 45 different mining companies. The biggest positions are the usual suspects - Agnico Eagle (7.99%), Newmont (6.81%), Barrick (5.11%). These aren't some sketchy junior miners operating out of a shed in Nevada. These are the real deal - companies with actual mines, actual production, actual profits.

And they're spread all over the place - Canada, Australia, South Africa, you name it. So when South Africa has rolling blackouts (again) or Peru decides to raise mining taxes (again), you're not completely screwed.

As global governments grapple with ballooning debt burdens, the gold mining sector is charting a refreshingly opposite course and GDX represents this trend very clearly. GDX’s net debt-to-EBITDA ratio over the past 17 years has fallen dramatically.

Peaking at around 1.6x in Q2 2014 amid the aftermath of the gold price boom, the ratio has since plummeted to a lean 0.3x by Q2 2025. This dramatic decline underscores a new era of fiscal discipline among major miners - gone are the days of reckless expansion; today's players are focused on strengthening balance sheets and generating free cash flow.

With history as a guide, this trend is very likely to continue falling further - deleveraging toward zero, or even negative territory, by 2030, potentially leaving miners flush with net cash amid rising gold prices.

This trend couldn't come at a better time for gold enthusiasts. As fiat currencies face pressure from unchecked sovereign spending, miners' conservative approach positions them to capitalize on the bull market without the overhang of heavy debt. It's a bullish signal for GDX and the broader sector, reminding us why hard assets like gold remain such a vital hedge.

One more thing that caught my eye... a couple of months ago, this thought-provoking post by mining analyst Oliver Groß, highlighted GDX for its remarkable 2025 performance - yet observed that paradoxically it had faced deep net outflows of $3.8 billion this year.

This disconnect has to spark our curiosity: while retail investors had been exiting GDX, big players were snapping up individual gold mining stocks like Newmont and Agnico Eagle directly, fueling the rally amid soaring gold prices.

Recent data shows a shift toward positive inflows in shorter periods (e.g., last month) when $596 million flowed into GDX. That's not retail money, folks. That's institutional money positioning.

Overall, Assets Under Management has grown substantially due to asset price gains offsetting outflows - AUM increased by +$9.51B over the past year despite -$2.72B in net flows.

As I’ve mentioned before, I think this current consolidation could have further to go. However, the net outflows that we saw earlier this year in GDX, during such a strong bull market, means that ordinary investors had been selling or avoiding the ETF despite its strong gains.

This suggests the triple-digit GDX rally has been driven by underlying gold price strength rather than widespread buying. That’s a very good sign which means even bigger upside when sentiment shifts. In other words, the real rally hasn't even started yet.

That’s all for today, folks. I’ll see you on Thursday.

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Rick Adams
Founder, GoldBuzz
rick@goldbuzz.com