September was a tough month for gold miners. The VanEck Gold Miners ETF (ticker: GDX) fell 10%, making it the worst-performing idea in one investor's portfolio. But despite the stumble, the manager behind that portfolio—Russell—isn't abandoning the trade. He's keeping a half-sized position, and he thinks there's still plenty of shine left in the sector.
Why the ETF took a hit
The GDX ETF tracks a basket of companies that mine gold, rather than the metal itself. That means it's a leveraged play on gold prices: when gold rises, miners often rise more, and when gold falls, they tend to fall harder. In September, gold's price dropped about 8%, and the miners ETF slipped roughly 10%—a classic example of that amplified move.
Russell had already trimmed his position in mid-August, when gold got stuck below $4,500 and its 200-day moving average. That's a key technical level that many traders watch as a signal of longer-term momentum. When an asset can't break above it, it often suggests the trend is losing steam. His caution proved well-timed.
The fundamentals that keep him interested
So why not just cut losses and move on? Russell points to strong fundamental reasons that go beyond the recent price action. Gold miners are still benefiting from a backdrop of elevated gold prices, which have been supported by central bank buying, geopolitical uncertainty, and expectations that interest rates may eventually come down. Lower rates tend to make gold more attractive because it doesn't pay interest, so the opportunity cost of holding it falls.
Miners also have a history of improving their cost discipline and returning cash to shareholders through dividends and buybacks. When gold prices stay high, even a modest pullback in the metal can leave miners with healthy profit margins. That's a different situation from past cycles, when miners were often overleveraged and poorly managed.
What it means for everyday investors
For the average investor, the key takeaway isn't about predicting gold's next move. It's about how to think about risk and position sizing. Russell's decision to cut his position in half before the drop is a reminder that even the most confident thesis can benefit from a disciplined exit plan. You don't have to be all-in or all-out; a half-sized position lets you stay in the game while limiting downside.
It's also worth remembering that gold miners are a volatile corner of the market. They can swing wildly on news about inflation, interest rates, and global events. That's why many financial advisors suggest keeping gold-related investments to a small slice of a diversified portfolio—typically 5% to 10%—rather than making them a core holding.
What to watch next
Investors will be watching gold's price action closely, especially whether it can reclaim its 200-day moving average. A break above that level could signal renewed momentum and potentially lift miners again. On the flip side, if gold keeps sliding, the miners ETF could face more pressure.
Also on the radar: the broader economic data. Recent reports show jobless claims dipping to 197,000, which keeps the bond market on edge about inflation and rate policy. And US factory growth cooled slightly in September, but the sector is still expanding. These numbers influence how the Federal Reserve might move on rates, which in turn affects gold and miners.
For now, Russell's approach offers a lesson in patience and risk management. He's not chasing the rally, nor is he panicking at the first sign of trouble. He's holding a position that reflects his conviction, but with a built-in buffer. That's a strategy any investor can apply to their own portfolio, whether they're looking at gold miners or any other volatile asset.
As always, do your own research and consider how any investment fits into your overall goals and risk tolerance. Gold miners can be a valuable diversifier, but they're not for everyone.
