Gold and Miner ETFs Losing Their Luster

July 23rd at 8:30am by Tom Lydon

Gold spot prices and the exchange traded funds that track their movements are beginning to dull as traders shift to a deflationary outlook.

SPDR Gold Shares ETF (NSYEArca: GLD) has been lackluster in recent weeks.

Gold weakened following Federal Reserve Chairman Bernanke’s reluctance to inject more money into the economy and failing to meet the market’s expectations for more quantitative easing, reports Seana Smith for Fox Business.

“The Federal Reserve will probably announce QE3, but we don’t know when it will be,” Ananthan Thangvel, Lakshmi Capital managing director, said in the article. “The market thinks that if we see one more bad economic report, we could get QE3. I disagree. I think it will be December at the earliest, and if that’s the case, gold could fall to $1,200 per ounce in the meantime.”

Over the week, gold futures for July delivery dipped more than 1%. Gold futures were trading around $1,585 per ounce Friday.

As of Thursday, July 19, investors have pulled $185.1 million out of GLD and $95.7 million out of the iShares Gold Trust (NYSEArca: IAU) as the prolonged financial distress pushed investors into other assets, like fixed-income investments.

“I think we’re looking at a deflationary period over the next six to 12 months,” James Cordier, founder of Optionsellers.com, said in the article. “Now’s not the time to buy gold. There are better investment opportunity elsewhere.”

Additionally, gold miner stocks have also been under pressure as gold prices remain in limbo. For instance, the the Market Vectors Gold Miners ETF (NYSEArca: GDX) is down 12.8% over the past month. [Gold Miner ETFs Dig a Hole]

“Avoid gold miners,” Thangvel, added.  “You’re taking on two significant risks when investing in gold miners.  You’re taking on risks in equities as well as risks with precious metals.  It’s not worth it.”

SPDR Gold Shares ETF

For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.