Rising Gold Prices Carry Metal, Miner ETFs

Joel Anderson  |

Rising gold prices over the last week have driven up ETFs tracking gold, silver, and precious metal miners. Gold was up almost 2 percent on Tuesday morning after a combination of a subpar jobs report Tuesday and comments from Chicago Federal Reserve President Charles Evans has markets believing that a taper for the Federal Reserve’s bond-buying program isn’t in the near future. On the whole, speculation that tapering would be delayed has driven spot gold prices higher, gaining over 4.5 percent since October 14. Spot silver prices have gained about 7 percent over the same period.

Rising Gold Prices Carry ETFs

Rising along with the price of gold was a predictable basket of ETFs connected to the price. Since October 14, the SPDR Gold Trust ($GLD) and the iShares Gold Trust ($IAU) are both up over 5.5 percent, and the iShares Silver Trust ($SLV) is up over 6.85 percent.

The bigger gainers, though, appear to be ETFs tracking precious metal mining equities. Since the start of last week, the Market Vectors Gold Miners ETF ($GDX) is up almost 13 percent, the Market Vectors Junior Gold Miners ETF ($GDXJ) gained almost 16 percent, and the Global X Silver Miners ($SIL) is up over 12.25 percent.

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Bank President Statements Good for Gold Bugs

Comments from Charles Evans to CNBC on Monday gave a strong implication that there would be no taper in the near-term, and the jobs report on Tuesday seemed to confirm this for traders. Evans was interviewed on CNBC’s Squawk Box on Monday and said that he needed to see consistent nonfarm payroll growth in excess of 200,000 a month before he would want to begin tapering stimulus.

"October is a tough one,” he said. “December? I think we need a couple of good labor reports and evidence of increasing growth, GDP growth. It's probably going to take a few months to sort that out."

Evans also implied that quantitative easing didn’t appear to have a set end point and that the Fed didn’t have a specific limit on how big the Fed’s balance sheet might get.

"I really don't think about it that way," he said. "We could go on as long as necessary. … We have in place the guidance on short term interest rates that is capable of adding an awful lot of accommodation during those periods when things might be turning down … Our number one risk is that people think we are going to step back and somehow add restrictiveness to the economy at all the wrong times."

Jobs Report Fuels Belief QE is Here to Stay

Tuesday’s big jump comes after the September jobs report, already delayed by the government shutdown, seemed to show a lack of the sort of growth Evans indicated would be necessary, with job growth at just 148,000. The report seems to show that economic growth was slowing even before the government shut down, and many economists predict the sluggish job growth could persist through the end of the year.

Continued stimulus should mean a weaker dollar, which in turn drives gold prices higher. And the signs that the Fed won’t taper QE appear to be piling up.

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