Gold's foray deep into bear market territory Monday is
claiming a predictable batch of victims, namely popular
such as the SPDR Gold Shares (NYSE:
) and the iShares Gold Trust (NYSE:
Of course, the miners and the
relevant ETFs are getting in on the act as
Unfortunately, gold's list of victims does not end there. The
yellow metal's slide is also plaguing several country-specific
ETFs tracking nations that are major gold producers. China and
the U.S. are the largest and third-largest gold producers in the
world, respectively, but there are reasons beyond gold's fall
that explain why the iShares FTSE China 25 Index Fund (NYSE:
) and the SPDR S&P 500 (NYSE:
) are lower.
When taking that into account and taking Ghana and Uzbekistan,
both top-10 gold producing countries, out of the equation, the
ETFs that track the largest gold-producing nations are still
getting beaten up on Monday. Even the newly minted Global X
Central Asia & Mongolia Index ETF (NYSE:
), which offers exposure to several central Asian countries
though not Uzbekistan, is down more than 4.7 percent.
Global investors looking to dodge the calamity caused by gold
should consider taking a pass on the following ETFs.
iShares MSCI Australia Index Fund (NYSE:
) Just last week, analysts published both bearish and
bullish views on Australian equities
. Today, EWA, the largest ETF tracking the world's second-largest
gold producer, is down 2.7 percent. That is not surprising given
the EWA's 19.1 percent allocation to materials stocks, including
BHP Billiton (NYSE:
), the world's largest mining company.
There is one way gold's fall could work in EWA's favor. One of
the most cited reasons for being bearish on Australian stocks is
the strong Australian dollar. The Aussie is a commodity currency
and the commodity it is believed to have an intimate correlation
to is gold. The correlation is not high as over the past five
years GLD has offered better than quadruple the returns of the
CurrencyShares Australian Dollar Trust (NYSE:
Still, any relief Australian exporters can get in terms of a
weaker Aussie would be viewed as a positive sign. The danger to
EWA is that with gold rapidly losing its safe-haven status, the
Australian dollar could rise even as gold falls as investors look
for new safe-havens. The Aussie fits the bill. After all,
Australia has an AAA credit rating and a three percent interest
rate, which is high by developed world standards.
iShares MSCI All Peru Capped Index Fund (NYSE:
) Although Peru is expected to be South America's fastest-growing
economy this year, it was noted two months ago that EPU's
materials sector exposure could be
. That has proven to be the case as the ETF has been hampered by
its 44.1 percent weight to the materials sector.
EPU faces a triple whammy in that it is not only a major gold
producer, but it is the world's largest silver producer. The
iShares Silver Trust (NYSE:
) is off 14 percent in just the past five days. The triple whammy
is completed by Peru's status as a major copper producer. The red
metal has proven far from immune to the slide in precious metals
and China's disappointing first-quarter GDP report.
Southern Copper (NYSE:
) and Buenaventura Mines (NYSE:
) are EPU's second- and third-largest holdings, combing for
nearly 21.3 percent of the ETF's weight. EPU is down more than 13
percent its 2013 high and a move below $39 would have the ETF
joining gold in bear market territory.
iShares MSCI South Africa Index Fund (NYSE:
) An easy call to make here as South Africa is the fifth-largest
gold producer in the world,
just ahead of Peru
. EZA is off 3.6 percent and gold's fall is only exacerbating a
bad situation for this ETF.
EZA has already been plagued alarmingly high unemployment rate
(over 20 percent) and the laggard performances of
the largest emerging markets this year
. Gold's slide has the ETF threatening support at $60 and if that
area gives out, EZA could return back to the October 2011 low
EZA has other problems, too. South Africa is the largest
platinum producer and the second-largest palladium producer
behind Russia. The ETFS Physical Platinum Shares (NYSE:
) and the ETFS Physical Palladium Shares (NYSE:
) are off 4.7 percent and 5.5 percent, respectively on
For more on ETFs, click
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