Gold miner ETFs were the worst-performing sector this week as the funds were hit hard by the precious metal’s decline to test $1,600 an ounce. Stock downgrades from Citigroup also weighed on the poor-performing ETF category.
Market Vectors Gold Miners (NYSEArca: GDX) and Market Vectors Junior Gold Miners (NYSEArca: GDXJ) were on track for weekly losses of 5.6% and 7.4%, respectively, in afternoon trading Friday.
Citigroup analysts cut their ratings on three gold miners on Friday, MarketWatch reports.
“We have been concerned about gold and silver prices for some time and the recent further loss of momentum has concerned us even more,” Citi analysts said in a note.
Gold has enjoyed a 12-year run of rising prices but regulatory filings reveal some high-profile investors including George Soros pared their stakes in gold ETFs in the fourth quarter. [Gold ETFs Fall]
“The problem with gold is that it is a very ‘long cycle’ metal and if it IS in the process of peaking now, then history suggests that it could go into hibernation for a long, long time,” the Citi analysts wrote, according to the MarketWatch report. “Of course, it may not be peaking, but our view is that we would need a global systemic risk level HIGHER than 2011 and 2012 to warrant an argument that gold’s bull market is not over. Alternatively, if these general systemic risks (i.e. across all currencies) are not to be gold’s driver, then we need the dollar to collapse in order for gold not to be peaking now.”
This week’s bottom three unleveraged ETFs were Market Vectors Junior Gold Miners, Global X Silver Miners (NYSEArca: SIL) and Market Vectors Gold Miners with declines of more than 5%.
The top three unleveraged ETFs this week were Guggenheim Global Solar Energy (NYSEArca: TAN), PowerShares Wilderhill Clean Energy (NYSEArca: PBW) and iShares DJ US Home Construction (NYSEArca: ITB) with gains of at least 3%.
In the major U.S. stock indices, the S&P 500 was set for a slight weekly decline of 0.2% in afternoon trade Friday while the Dow slipped 0.5% and the Nasdaq Composite shed 0.2%.
In next week’s economic data, look for reports on homebuilder confidence, housing starts, producer prices, the latest Fed minutes, consumer prices and existing home sales. Markets will be closed Monday for Presidents’ Day.
Market Vectors Junior Gold Miners
The opinions and forecasts expressed herein are solely those of John Spence, 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.