Physical gold has performed strongly over the past year, but gold mining stocks have been continuously dragged down by cost inflation and operational pressures at mines — the gold mining sector fell over 7% in a single week in March, triggering a technical bear market.

This divergence is precisely the logic behind betting on $Microsectors Gold Miners -3x Inverse Leveraged ETN(GDXD.US): rising copper prices and mine energy costs are squeezing the per-ounce profit margins of gold mining companies, leading to a rare divergence between gold mining stocks and the gold price. VIX above 19 supports safe-haven demand for physical gold (benefiting GLDM), while the logic of inflation eroding miners' costs has not dissipated (supporting GDXD).

If the gold price falls below $4,500, the long position logic for GDXD will be stronger; if the gold price continues to rise and cost pressures on miners ease, the divergence between the two will narrow.