GDX Market Vectors Gold Miners ETF Price Prediction for 2011

Market Vectors Gold Miner ETF (GDX) is one of the most popular ways to speculate on the price of gold miners without having the risk of an individual gold mining stock. In order to predict the price of the GDX, you have to look at how both the S&P and Gold will perform in 2011.

Performance of the S&P in 2011

There are several reasons why the S&P is set to rise in 2011

• Third year of a Presidential cycle - This is historically the best performing year in the four year presidential cycle. The reason being is that the people get to vote against the administration late in the second year with mid-term elections. That creates a division between the White House and the Congress. And when Washington is deadlocked, businesses tend to flourish from the lack of government interference. This trend is especially powerful when the White House and the Congress are controlled by different parties. The average rise, in the third year of a Presidential cycle, with opposing parties in power, is about 25% to 30%.
• S&P is above its 50 day and 200 day moving average - The S&P is in a bullish trend, as of the beginning of 2011. This bodes well for the rest of the year.

Performance of Gold in 2011

Gold has rising for the past 11 straight years. The bullish run in Gold is due to several factors.

• Money printing by large governments - Everyone from the United States to Japan has been racing to devalue their currency. And when currencies are weak, people seek to exchange their money for something that his finite. For 5000 years, Gold has been the go-to store of wealth
• Commodity bull run - For the past ten years, we have seen a rise in just about every commodity. This is due many countries industrializing at a massive rate, from China to India to Brazil. These countries' thirst for everything from oil to food will cause gold to rise as well.

Right now there is nothing to indicate that gold will reverse in 2011. On a conservative end, look for gold to rise about 20% from the current $1,500 level to $1,800 price.

How the S&P and Gold effect Gold Miners

Gold Miners are effected by both the price of gold and the stock market. And when both the S&P and Gold rise, Gold Minters tend to amplify the move upward. With our current estimates of gold rising 20% and the S&P rising 25% to 30%, it is conservatively estimated that the Market Vector Gold Mining ETF - GDX will rise about 50% to 60% in 2011. That would put the ETF (Symbol- GDX) at a price of about $90 by December 31, 2011.

If you want to speculate on the price of Gold miners, you can simply by the ETF with the symbol GDX. However, for those who wish to swing for the fences, consider these seasonal trends and technical set-ups.

Seasonal trends:

The stock market and energy markets are very strong on March and April - Oil tends to have its fastest rise in March, April, May and June. Sometimes gold tends to rise with oil. Also, the stock market tends to rise in March and April, before the "sell in May and go away" trend. That means that March and April are the sweet spot for Gold Miners. Take a look at opening a JUNE call spread on the GDX at the end of February.

Technical trends:

Since the S&P and Gold have a strong correlation to gold miners, you should consider opening a call spread on the GDX when both gold and the S&P are above their 20-day and 50-day moving average. Aim for a 20% gain, on your options spread, and be sure to close the spread if either gold or the S&P falls below their 20-day moving average.

Summary

The Market Vectors Gold Mining ETF is one of the best ways to speculate on the gold miners. 2011 should be a strong year for gold miners as the price of gold and the U.S. stock market is poised to rise. Look at seasonal and technical set-ups, if you are looking to speculate with options. With the right research, you will be able to prosper with the Gold Mining ETF - GDX.