Gold has had a rocky summer, as the yellow metal plunged in May
and June, reaching its low for the year. However, to start July,
the metal has taken off and has produced solid gains on the back of
rising tensions and a sluggish dollar.
This apparently wasn't meant to last though, as gold has faced some
weakness in recent trading sessions. Declining risks in Syria are
dulling the appeal of gold from a safe haven perspective, while it
also appears as if traders are starting to accept the idea of the
Fed taper beginning.
After all, worries over a war in the Middle East aren't much of an
excuse for the Fed anymore, while the U.S. economy is increasingly
back on track. The most recent jobless claim figures came in well
below the consensus, pushing the 4-week moving average ever closer
to the key 300,000 mark (though a
technical problem may be responsible
for magnitude of the decline).
Given this continued traction on the jobs front, as well as the
cooling tensions in the Middle East, many seem to be betting on a
modest taper from the Fed at the upcoming policy meeting. This is
viewed as terrible news for safe haven investments like gold,
pushing many to take a negative view on the metal in the short-term
Time to Buy the Covered Call Silver and Gold
"Today's data is another nail on the coffin, and people expect the
announcement on tapering to come next week,"
, the head dealer at Integrated Brokerage Services LLC in
, said in a telephone interview
for a Bloomberg article
. "People are getting bearish about gold."
This news pushed down all of the top gold ETFs-
-about 2.4% on the session. Volume was only slightly above average
to start the day, while the trend downward for the
precious metal space
extended the losses for gold ETFs to about 6% over the past ten
Meanwhile, investors also saw some weakness in the gold mining
space as well. Products in this category tend to trade as leveraged
plays on gold, so when the yellow metal is sliding they can be
This was the case once again in Thursday trading, as the top gold
mining ETF the Market
Vectors Gold Miners ETF (
, lost about 3.5% to open up the session, while the junior product-
-declined by 4.7%. Now, GDX is down about 8.7% in the past ten
days, while GDXJ has declined by 11.7%, squashing any hopes of a
gold rally (See
Gold Mining ETF Investing 101
Although there was a technical problem with the jobless
claims-which could impact the actual figure-the trend is still in
the right direction. Cleary the economy is slowly moving ahead, and
other data points-such as strong car sales and a decent ISM
Manufacturing reading-suggest that strength is building in the U.S.
3 Small Cap Value ETFs Poised to Outperform
Add this in to a less risky geopolitical environment, and many are
starting to bet on a modest taper coming from the Fed at their next
policy meeting. This type of situation is very bearish for gold, so
look for precious metal ETFs, and their mining cousins, to face
some short term trouble so long as demand stays low for this
traditional safe haven.
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MKT VEC-GOLD MI (GDX): ETF Research Reports
MKT VEC-JR GOLD (GDXJ): ETF Research Reports
SPDR-GOLD TRUST (GLD): ETF Research Reports
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ETFS-GOLD TRUST (SGOL): ETF Research Reports
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