A lot of investors are wondering: What’s going on with gold? How come it’s not popping higher when central banks around the world are printing money? Isn’t gold a hedge against economic weakness? With the global economy slowing down, how come gold isn’t rewarding my portfolio?

One reason gold isn’t performing as expected is because we’re in a deflationary environment. Gold is a good hedge against inflation, not deflation in today’s world. Take a look at Market Vectors Gold Miners exchange-traded fund (ETF) (GDX) during the financial crisis of 2008. On March 8, 2008, it closed at $56.42 per share. On Oct. 19, 2008, it closed at $17.80. That’s a massive hit and this was during a short stint of deflation. (For more, see: The Better Inflation Hedge: Gold or Treasuries?)

Fortunately for longs, gold and GDX rebounded much faster than the rest of the market right when the first quantitative easing (QE) program was announced. The program involved purchasing $600 billion in mortgage-backed securities (MBS) and agency debt, which was later expanded to the purchase of $750 billion in mortgage-backed securities and $300 billion in treasury securities. Gold spiked around the same time. And this proves a key point for successful investing: if you want to make significant money, you need to get in before the trend kicks in. At the moment, gold appears to be range-bound.

Recent Events

If you still think gold should pop, consider recent events: the European Central Bank announced it will purchase 60 billion euros of bonds each month, the Swiss National Bank abandoned its peg to the euro, and other nations are lowering their interest rates. Despite all of this, gold has only seen slight appreciation. Why? Because Wall Street works in the following manner: Buy the rumor, sell the news. (For more, see: Get to Know the Major Central Banks.)

Currently, there are no significant upside catalysts for gold. In fact, gold is more likely to depreciate than appreciate in the near future. However, that trend will eventually reverse itself when we see organic economic growth, which will be accompanied by rampant inflation. Therefore, any gold bulls who are patient (years, not months) should be rewarded. And for those who want to prepare ahead of time, or want to scale into a position by dollar-cost-averaging, they need to know if GDX should be a top option to consider. (For more, see: Hedge Inflation with Gold ETFs.)

GDX

Below are key metrics for GDX (as of 3/17/15).

Purpose: Tracks the NYSE Arca Gold Miners Index

Net Assets: $7.50 billion

Average Volume: 48,936,200

Dividend Yield: 0.57%

Expense Ratio: 0.53%

Sector Weightings: basic materials (100%)

Top 10 Holdings (as of 2/26/15): Goldcorp Inc. (GG) 10.19%; Barrick Gold Corp. (ABX) 8.64%; Newmont Mining Corp. (NEM) 7.48%; Newcrest Mining LTD (NCMGY) 5.54%; Randgold Resources (GOLD) 5.36%; Agnico Eagle Mines Ltd. (AEM) 5.21%; Franco-Nevada Corp. (FNV) 4.68%; Silver Wheaton Corp. (SLW) 4.56%; Anglogold Ashanti Ltd. (AU) 4.37%; and Royal Gold Inc. (RGLD) 4.20%.

GDX vs. GG

Notice that Goldcorp plays the biggest role. Would investing in Goldcorp be more effective? Take a look at performance comparisons (as of 3/18/15):

Goldcorp has outperformed GDX for every time frame. This has a lot to do with GDX’s 0.53% expense ratio. Now add the fact that Goldcorp offers a 2.5% dividend yield and it’s a no brainer. (For more, see: How Can I Invest in Gold?)

The Bottom Line

Is right now the best time to invest in gold? Not likely, but the best time to invest on a historical basis hasn’t taken place yet. Keep in mind that there might be some pain before there are rewards. (For more, see: A Holistic Approach to Trading Gold.)

Dan Moskowitz does not have any positions in GDX, GG, ABX, NEM, GOLD, NCMGY, FNV, SLW, AEM, EGO, RGLD.