Gold-related exchange traded funds were tarnished Tuesday as a risk-on sentiment helped drive growth assets and weighed on safe-haven investments.
The SPDR Gold Shares (NYSEArca: GLD) fell 2.8% Tuesday as Comex gold futures dropped 2.9% to $1,204.1 per ounce.
Meanwhile, the Market Vectors Gold Miners ETF (NYSEArca: GDX), the largest and most heavily traded gold miners ETF, plunged 8.0% on the weaker bullion.
Gold-related assets have been rallying as global volatility helped support safe-haven investments and a weakening U.S. dollar helped prop up the USD-denominated hard asset.
However, the precious metal is seeing prices fall off as investors dive back into riskier segments of the market.
“It was actually quite positive that gold behaved like a safe haven again, and that showed that in times when there is a lot of volatility in equity markets, gold is benefiting from that,” Capital Economics analyst Simona Gambarini told Fox Business. “(But) we’re not surprised by the correction. Gold is probably going to fall further if the situation improves in global equity markets. If the panic subsides, it is probably going to fall to $1,150.”
If the equities markets continue to improve and investor confidence strengthens, the safe-haven gold play may continue to lose its luster. ETF investors may hedge against further weakness in gold through inverse or short ETF options. For instance, the ProShares UltraShort Gold (NYSEArca: GLL) provides a two times inverse or -200% daily performance of gold bullion. Alternatively, ETN options include the DB Gold Double Short ETN (NYSEArca: DZZ), which tries to generate the twice inverse or -200% return of the daily performance of gold; DB Gold Short ETN (NYSEArca: DGZ), which tries to reflect the inverse of gold price movements; and VelocityShares 3x Inverse Gold ETN (NYSEArca: DGLD), which tries to reflect the performance of three times the inverse or -300% daily performance.
Additionally, investors can look to hedge bets against gold miners with bearish options like the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST), the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST), ProShares UltraShort Gold Miners (NYSEArca: GDXS) and ProShares UltraShort Junior Miners (NYSEArca: GDJS).
SPDR Gold Shares
Max Chen contributed to this article.
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.