Gold ETFs See Exodus As Bullion Gets Hammered

Michael Teague |

It would be an understatement to say that gold, as a commodity, has had a rough year.

The precious metal began its decline as a result of the tremendous gains for equities that ramped up significantly in 2103. With the apparent unyielding support of Federal Reserve spending, investors herded into stocks under the impression that the more risky asset class was going to be significantly less risky for the near to mid-term, obviating the need for the safe haven of gold.

Gold then took another shellacking at the tail end of the Cyprus bank bailout negotiations, in reaction to rumors that the island-nation’s central bank would consider selling off its reserves of yellow metal in order to meet the stipulations of the European Union’s bailout package. Investors feared that this could set a precedent for Europe’s numerous ailing banks, effectively eviscerating gold’s long-standing position as a safe place for their money during economic downturns.

And now, gold is getting battered in the wake of Ben Bernanke’s statements last week that the Fed was considering an end for stimulus spending as early as next year, despite the fact that numerous Reserve officials emerged this week to take the rougher edges off of what the Chairman said during a press conference subsequent to the FOMC meeting.

The current predicament has been dutifully reflected in the increasingly fashionable world of Exchange Traded Funds. The popular SPDR Gold Shares ETF (GLD) that tracks the price of physical gold as closely as possible has watched nearly 30 percent of its price ebb away since the beginning of the year from around $160 per share in January to Friday’s price of $118.59. GLD has not experienced this much duress since the fund was created nearly ten years ago.

Much the same can be said of the iShares Gold Trust ETF (IAU), that is now trading for under $12 after starting off the year at around $16, a nearly 30 percent price-drop. In fact, all of the unleveraged gold ETFs are down around 25 percent or more so far this year: the Physical Swiss Gold Shares ETF (SGOL) is down 28.5 percent, the Power Shares Deutsche Bank gold ETF is down 29.4 percent, and the UBS E-Tracs CMCI Gold Total Return ETF is off 29.10 percent.

Leveraged Gold ETF products are faring even worse, with the double-leveraged (DGP) down nearly 44 percent and the triple-leveraged (UGLD) down over 60 percent.

The price of bullion itself has sold-off to an unexpected and almost shocking extent, dipping below $1,200 briefly during trading on Friday, when under $1,300 would have been more or less an offensive suggestion just a couple months ago.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
ABUS Arbutus Biopharma Corporation 3.24 0.16 5.03 99,055
UGLD VS 3X GOLD 11.42 0.03 0.26 106,495


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