Again under siege with gold trading at its lowest levels since early August, mining ETFs such as the Market Vectors Gold Miners ETF (NYSEArca: GDX) have plenty to worry about, including what life could look like if bullion falls below $1,000 per ounce.
Gold futures are trading around $1,286 per ounce at this writing. The yellow metal turned in its best quarterly performance of the year in third quarter as the SPDR Gold Shares (NYSEArca: GLD) rose 5.8%, but GDX, the largest gold mining ETF, eked out a gain of just half a percent. Tuesday’s downdraft could be a sign that October is set to live up to its billing as dreadful month for gold bulls.
Since the start of this century, October ranks as merely the tenth-best, or third-worst, month in which to own gold. That is only slightly better than the 1990s, when October was the second-worst month for gold. In the 1980s, October was gold’s tenth-best month and overall since 1980, October is the worst month for the yellow metal. [Gold’s Short-Lived Fed-Fueled Gains]
Things could worse before they get better for the already embattled miners. With gold prices struggling to stay above $1,300 an ounce, the spotlight is back on which miners are burning cash and which ones can profitably extract bullion from the earth when spot prices tumble to $1,300 or $1,200 per ounce or even lower. According to a Citigroup research note, global gold on mine unit costs rose 12% year-over-year in the June 2013 quarter. Due to the combination of rising costs and falling gold prices, gold miners have witnessed a quick contraction in margins. [Mining ETFs Flirt With Disaster After Rocky September]