Gold futures plunged another 2.6% Thursday as strong retail sales data stoked speculation the Federal Reserve could move to taper its $85 billion-per-month asset-buying program at its policy meeting next week.
Tapering talk, as it has for all of this year, punished gold and the exchange traded funds that are backed by physical holdings of bullion. The 2.6% drop for gold futures for February delivery was the largest drop for the most active contract since Oct. 1, according to Bloomberg.
The SPDR Gold Shares (NYSEArca: GLD), the largest gold ETF, and the iShares Gold Trust (NYSEArca: IAU) both lost more than 2% Thursday, bringing their year-to-date losses to over 27%. Gold ETFs also continue to hemorrhage assets.
“Another 17 million tonnes have left gold-backed exchange traded funds in December, with holdings of the world’s largest gold ETF, SPDR Gold Shares already down just under 10 tonnes. Bullion held by the fund established November 2004 are now at their lowest level since January 2009,” reports Frik Els for Mining.com.
Massive outflows from gold ETFs were seen in the second quarter after start of tapering chatter, but those outflows slowed before ratcheting back up in October. [Gold ETFs Can’t Wait for October to End]
GLD and IAU are both among the 10 worst ETFs in terms of 2013 outflows. Making matters worse is that professional traders are not bullish on gold in the near-term. “Data from US Commodity Futures Trading Commission showed hedge funds are now the least bullish on the yellow metal since 2007 when bullion traded for $700 an ounce,” according to Mining.com.
Mining ETFs are offering no relief. The Market Vectors Gold Miners ETF (NYSEArca: GDX) lost almost 1% after Iamgold (NYSE: IAG) said “it has suspended future dividend payments until further notice.” That news forced the stock down almost 11%. Iamgold accounts for almost 1.4% of GDX’s weight. [Tax-Loss Selling Could Weigh on Mining ETFs]
SPDR Gold Shares
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD.