GLD and GDX have historically been two of the worst ETFs to own in March
Gold stocks have been on a tear in 2017, as illustrated by the SPDR Gold Trust (GLD) and VanEck Vectors Gold Miners ETF (GDX). However, this duo of gold-based exchange-traded funds (ETFs) recently sent up a relatively rare signal, according to Schaeffer's Quantitative Analyst Chris Prybal, and if recent history is any indicator, the red-hot gold ETFs could be ready for a March cool-down.
GLD and GDX -- which exhibits about triple the volatility of GLD -- were in relative unison until just recently, both running into their respective 160-day moving averages. Over the past five days, GLD has racked up a gain of 1.2%, while GDX has dropped nearly 8%. Using only one signal every month, this is just the 64th time since inception that GLD and GDX have endured a 5-plus percentage-point difference, noted Prybal.
In the past, these signals have preceded weaker-than-usual price action for GLD. Specifically, GLD has averaged a one-week loss of 0.3% after these signals, compared to an average anytime weekly gain of 0.2%. Looking as far as six months out (126 days), the GLD tends to lag its anytime returns following a notable divergence with GDX.
GDX has also averaged a one-week loss after a signal, down 0.6%, and higher just 43% of the time. However, GDX drastically
outperforms after that. The ETF averages a one-month (21-day) gain of 2.4%, compared to an average monthly return of 0.4%. And six months out, GDX has been higher by an average of 4%, compared to its anytime six-month return of 1.4%.
However, "March is historically not the best month for GLD or GDX," Prybal notes. Since inception, GLD has lost 1.1% in March, on average. Further, it's been one of the worst ETFs to hold in March during the past 10 years, ending higher just 20% of the time, with an average loss of 1.1%. GDX, meanwhile, has also been the worst ETFs to own in March, going back 10 years, and since inception has averaged a loss of 2.8% in the month. "The cherry on top is President Donald Trump's speech to Congress tonight," Prybal notes, "as he has shown a propensity to assuage the equities market" -- which often dulls gold's "safe haven" allure.
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