Two developments have led gold to continue its slide that began in early 2013. One, as fears that the Federal Reserve would ease their bond buying program increase, the price of gold (which has been propped up by the stimulus) has fallen. Two, on Aug. 6, the US trade deficit fell 22.4 percent to $34.2 billion, the lowest it has been since 2009.
With the confluence of these two events, the US economy appears to be returning to something akin to normal. And this is bad news for gold bugs, who seek solace in the precious metal when the economy tanks. Physical demand for the metal, especially in China (the world’s second largest buyer), is down. And gold ETFs have responded in kind.
Gold miner ETFs had shown signs of rebounding in mid-July , as production costs remained low while bullion dropped. But it appears that was only a temporary correction, as those gains have been entirely erased.
Direxion Daily Gold Miners Bear 3X Shares ($DUST), which seeks a 300-percent inverse of the Gold Miners index, spiked on lowered demand for gold. The investment led all ETFs on the day, with a 12.78 percent jump to hit $101.50 a share. PowerShares DB Gold Double Short ETN ($DZZ) was up 2.94 a share to hit $7 a share.
Predictably, the worst performing ETF on the day were the gold bulls. The very popular Market Vectors Gold Miners ETF ($GDX) is down 4.29 percent to hit $24.34 a share. Direxion Daily Gold Miners Bull 3X Shares ($NUGT) plummeted 12.79 percent to hit $5.34 a share. That ETF has lost over 90 percent of its value since the beginning of the year.
The US’ largest gold miner, Newmont Mining Corp. (NEM) posted very disappointing earnings on July 26, including a $2 billion dollar write off. The shortfall surprised analysts, and affected prices worldwide. The company also announced they would lay off a third of their workforce. And the world's largest producer, Barrick Gold (Corp. (ABX) announced on Aug. 2 they'd be closing 12 of their 27 mines as they attempted to mitigate the biggest losses in the industry. Both underperformances further exacerbated the ongoing freefall of gold prices.
Gold is down to $1,285.20 an ounce. It has lost over a quarter of its value in 2013.