Another Manic Monday for Gold Miners

June 24th at 2:00pm by Tom Lydon

Shares of gold miners and the ETFs that hold them were not in a position to endure any more bad news, but that is exactly what the downtrodden group got on Monday. The Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) each hit new 52-week lows Monday. GDXJ is the worse offender with a loss of more than 6%, which extends its three-month tumble to nearly 50%.

Last week, bullion and the miners were punished after Federal Reserve Chairman Ben Bernanke on Wednesday indicated the Fed may taper its bond purchases. The bad news has continued to pile up since then. [Gold Miner ETFs Take a Header]

In a report released over the weekend, Goldman Sachs slashed its 2013 an 2014 price targets on gold. The bank cut its target for the end of this year to $1,300 an ounce from $1,435 and lowered its prediction to $1,050 from $1,270 for the end of 2014, reports Glenys Sim for Bloomberg.

Last week was gold’s worst weekly performance since 2011 and tumbling gold prices come as miners are struggling to keep pace with rising costs. The combination of rising costs and sliding spot gold prices is proving toxic and could force some miners to abandon operations if the commodity spends significant time trading below miners’ breakeven prices.

Australia’s Newcrest Mining announced a $5.5 billion write-down Monday. The company, while not a holding in GDX, is Australia’s largest gold miner and its write-down means gold companies will have written down assets by about $17 billion in the past 16 months, report David Stringer and Liezel Hill for Bloomberg.

Compounding the woes, Barrick Gold (NYSE: ABX), GDX’s second-largest holding with a weight of almost 10.2%, said it will cut 100 jobs at its Canadian headquarters. Shares of Barrick also touched a new 52-week low today and are off 50% in the past six months.[Short Sellers Move on Mining ETFs]

Despite the woes for ETFs such as GDX and GDXJ, investors have not only stuck by these funds this year, they have actually plowed more money into the funds. GDX and GDXJ entered trading Monday with a combined $6.7 billion in assets, nearly $449 million of which has arrived this year, according to Index Universe data.

Speaking of GDXJ, in a sign of that ETF’s breathtaking declines, Market Vectors announced the ETF will undergo a 1-for-4 reverse split on July 1. [Market Vectors to Reverse Split 7 ETFs]

Market Vectors Junior Gold Miners ETF

ETF Trends editorial team contributed to this post.

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.

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