Stocks have shown some vulnerability lately but there is an exchange-traded fund (ETF) that focuses on a commodity that seems to be in a decided uptrend, even though it pulled back a bit this week. This ETF is the Market Vectors Gold Miners ETF (GDX).

Gold prices have been on the rise for months, and subscribers to my Successful Investing newsletter have profited nicely from my recommendation of GDX. That position had risen 13.95% through the close of trading last Friday, after I recommended the ETF on Feb. 7. I also recently advised my subscribers in the newsletter to double their holdings in GDX.

Not only am I a fan of gold, but I read today that the price of gold is supposed to climb from the record high of $1,476.37 a troy ounce that it reached on April 11 and top $1,600 an ounce by the end of the year, according to a report by independent metals consultancy GFMS Ltd. Another encouraging sign for investors thinking about buying the ETF is that GDX has pulled back in the past several days, so you can purchase the fund at a discounted price compared to its peak, as the chart below shows.

The rise in gold is supported by loose monetary policy in the United States and elsewhere, as well as investor concerns about the stability of the economic recovery in developed economies. Here’s a description about GDX, in case you are interested in considering an investment in the fund. The ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of NYSE Arca Gold Miners Index. The Index, a modified market capitalization-weighted index, provides exposure to publicly traded companies worldwide that primarily are involved in gold mining. The holdings of the Index consist of a diversified blend of small-, mid- and large-capitalization stocks.

The following table shows the top-10 holdings of GDX, as of the close of trading on April 12. Here we see that even the largest stake in the ETF, Barrick Gold, only represents 14.83% of the fund’s assets. That’s sound diversification in a sector fund.

With the U.S. dollar retreating, GDX offers a hedge. The fund also has the bulk of its assets denominated in currencies other than the U.S. dollar. The top five countries where GDX held its assets, as of the end of 2010, were: 65.3% in Canada; 13.6% in the United States; 13.0% in South Africa; 4.6% in Peru; and 3.5% in the United Kingdom. That asset allocation helps to protect you from the sliding U.S. dollar.

For advice about which ETFs to buy and to sell, I urge you to sign up for my ETF Trader service. As always, I am pleased to answer any of your questions about ETFs, so don't hesitate to contact me if you have one. To send a question to me, simply click here. You may just see your question answered in a future ETF Talk.