Gold stocks had an incredible run to start the year.[ad#Google Adsense 336×280-IA]The VanEck Vectors Gold Miners Fund (GDX) – the most popular exchange-traded fund for gold stocks – rocketed more than 150% from its January low to its August peak.
Since then, it has pulled back more than 30%.
That trend will likely continue through the end of the month.
And that creates a great opportunity to profit…
Take a look at the following chart of GDX…
You may not realize it, but it is common for the share prices of gold stocks to fall this time of year. That’s because of a strategy called “tax-loss selling.”
You see, U.S. and Canadian investors can sell underwater stocks at a loss to offset their total capital gains tax liabilities each year. Basically, investors can use this strategy to reduce their overall tax bills. (Canadian investors can even use the losses to reduce gains from prior years.) That’s why investors sell losing positions by December 31. They can always buy back the stocks after 30 days.
By looking at the chart above, you’ll notice that GDX fell in the closing months every year since 2011. And as you can see in the table below, in each instance except 2013, the fund staged a big rally to start the next year…
As I said, much of these gains occurred because of tax-loss selling.
If you want to take advantage of this strategy this winter, you should buy GDX before the end of the year. Or you could create your own index by buying a handful of stocks.
Consider names like major producers AngloGold Ashanti (AU), Yamana Gold (AUY), Semafo (SMF.TO), and Gold Fields (GFI). Each of these names trades at less than 12 times price-to-free cash flow today and has a reasonable amount of debt. They have solid financials and should do well during the uptick in gold stocks to start 2017.
Buy these stocks before the end of the month. Plan to sell your positions by March 1. But if the price of gold continues to move higher – like it did to start 2016 – you might want to consider keeping your gold stocks beyond then.
Source: Growth Stock Wire