Gold Bear Market: Time to Buy This Top Gold Stock/ETF

It was seemingly unthinkable earlier this year as gold raced to new highs, but the yellow metal is now in the throes of a bear market. Using the SPDR Gold Shares (NYSEMKT: GLD), the largest gold-backed exchange-traded fund (ETF), as the measuring stick, bullion's bear market is confirmed by the ETF trading 22% below its 52-week high at the close of U.S. markets on June 16.

Not surprisingly, the commodity's slide is a serious drag on gold stocks. Just look at the VanEck Gold Miners ETF (NYSEMKT: GDX). The largest ETF dedicated to companies that extract gold from the Earth is some 25% off its 52-week high, joining its physical gold friends in the bear camp.

Gold's in a bear market and it's plaguing this mining ETF. Image source: Getty Images.

The VanEck ETF's recent weakness is a reminder that, while mining stocks are closely correlated with gold prices, these equities, broadly speaking, have a track record of overshooting the commodity's price movements in both directions. Plus, gold miners, including those held by this ETF, are often more volatile than gold itself. All that said, this mining ETF may offer an opportunity for risk-tolerant investors.

What needs to go right for GDX to rebound

The easy answer is that gold will regain its groove, and that could happen if the Federal Reserve cuts interest rates. The gold/rates relationship is easily explained. Physical gold or an ETF such as the aforementioned SPDR fund yields no dividends or interest payments to investors, so when Treasury yields are elevated, low-risk U.S. government debt is simply more enticing to many investors than no-income gold.

The issue is that the Fed maintained rates at its June 17 meeting and hinted at a possible rate hike later this year . Still, investors may want to keep an eye on the $25.9 billion VanEck ETF for multiple reasons, including the end of the war in Iran. That's facilitating lower oil prices, which is a boon for input-intensive material stocks, including the diesel-hungry miners included in this ETF.

Second, larger, upper-tier gold miners are fundamentally sturdy. In 2025, larger miners notched margin expansion while posting revenue and return on equity (ROE) gains. Plus, investors don't have to pay up to get involved in gold miners, as the group trades at a noticeable earnings discount to the broader market.

So, at a minimum, there's a fundamental case for monitoring the VanEck ETF, and if gold regains its lost luster, the fund should participate in that resurgence.

Considerations for long-term investors

For those viewing the gold miners as an investment rather than a potential rebound trade, there are other considerations. Gold equities are notoriously under-owned. Some of the reasons for that include poorly executed deal-making years ago, concerns about dividend dependability, and the specter of geopolitical volatility (miners operate in some countries that aren't exactly democracies).

The industry isn't a lost cause. Some experts believe gold miners could court a broader investor audience by being clear about value creation, being selective with mergers and acquisitions, and sticking to clearly defined operational strategies.

Those changes won't happen overnight. While investors wait, the gold miners' ETF would surely benefit from lower interest rates. The VanEck fund charges 0.51% per year, or $51 on a $10,000 investment.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.