Gold futures are off more than 2% today, sending physically-backed gold exchange traded funds, including the SPDR Gold Shares (NYSEArca: GLD), to five-year lows. Predictably, this is awful news for gold miners stocks and the relevant ETFs.
This is how bad things are getting for gold and silver miners ETFs: To this point in Monday’s session, 48 ETFs have hit all-time lows. Ten of those funds are gold or silver miners ETFs. It looks like things will get worse for the group before they get better.
“Gold has fallen out of favor as Federal Reserve Chair Janet Yellen prepares to raise U.S. interest rates this year, strengthening the dollar and reducing demand for havens. Producers are struggling to adapt to a lower bullion price after a decade of debt-fueled expansion, acquisitions and cost inflation during the boom years that saw bullion peak at $1,921.17 an ounce in September 2011,” report Kevin Crowley and Adam Haigh for Bloomberg.
Of Monday’s eight worst-performing non-leveraged ETFs in terms of percentage losses, each is a gold or silver miners ETF, indicating the battered group could be poised to see significant outflows, something these funds have largely dodged despite significant declines in recent weeks. While GLD has shed $546 million since the start of the current quarter, the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), the two largest gold miners ETFs by assets, have lost a combined $41.3 million this month. [Trouble for Gold Miners ETFs is Coming]
GDX turned nine in May and in the world of technical analysis, that is not that old, but the ETF has violated an array of long-term support areas. Chris Kimble of Kimble Charting Solutions notes the NYSE Arca Gold Bugs Index (HUI) and the PHLX Gold/Silver Sector Index (XAU), neither of which are tracked by GDX or GDXJ, are in trouble. [Gold Miners ETFs for the Contrarian Investor]
Kimble recently pointed out that the Gold Bugs Index violated horizontal support that it had honored since late 2000. If the index falls below 100, a ways off to be sure, its 2001 lows could be revisited. Leveraged miners ETFs are also being taken to the woodshed.
The Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG) and the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) are off 19.3% and 22.8%, respectively, today with each hitting 52-week lows. Struggling to hold the $4 area, NUGT looks like a viable candidate for a reverse split, an offense committed by JNUG in December. [Finally, a Reverse Split for JNUG]
JNUG underwent a 1-for-10 reverse split on Dec. 23, but the ETF has tumbled 76.2% over the past six months.
Direxion Daily Gold Miners Bull 3X Shares
Tom Lydon’s clients own shares of GLD.