Exchange traded funds tracking gold, silver and miner stocks were among the steepest decliners Tuesday as global markets sold off on concerns the latest troubles in Greece will shatter the Eurozone.
ETFs that invest in miner shares suffered even worse losses. Market Vectors Gold Miners (NYSEArca: GDX) dropped 4.2% and Global X Silver Miners (NYSEArca: SIL) declined 4.8%. Both ETFs set fresh 52-week lows on Tuesday.
Meanwhile, gold prices fell to a four-month low.
The future of Greece’s political leadership is in doubt following the weekend elections, raising fears the financially strapped country will exit the euro. On Tuesday, the ASE Index, a benchmark of Greek stocks, sank to its lowest level since 1992. Greece’s market is down about 90% from the peak in 2007. [Greece ETF Hits New Low on Euro Worries]
Europe’s debt crisis has heated up in recent weeks but investors appear to be favoring the U.S. dollar as a safe haven rather than gold. Currency ETFs such as PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) have benefited from this recent trend.
“Greece may default on its debt as early as next month,” said Steve Scacalossi, a vice president at TD Securities, in a Dow Jones Newswires report. “The weekly charts for gold and silver look menacing.”
“What we’ve seen in recent weeks is rallies have been increasingly weaker on the upside, and that is a warning that we are going to see another test on the downside,” added Daniel Smith at Standard Chartered in a Reuters report. “Gold didn’t benefit from the latest European problems and part of that is the U.S., which has been outperforming relatively speaking, so that is handing the dollar strength.”
Market Vectors Gold Miners
Full disclosure: Tom Lydon’s clients own GLD and SLV.
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