Equities Eroding Demand for Gold
As we edge toward a post-Brexit world, investors are slowly easing off the safe haven of gold and back into global equities. The Dow Jones Industrial Average recently hit new all-time highs, and European stocks are looking more and more like they’re shaking off Brexit fears. From Bloomberg:
“Global stocks are near the highest this year. While the Bank of England on Thursday unexpectedly kept interest rates unchanged, it signaled more stimulus will come in August to aid the economy following the U.K.’s vote to leave the European Union. Speculation has also grown that Prime Minister Shinzo Abe is contemplating so-called helicopter money to revive Japan.”
Gold Prices Slump Thursday Morning
Gold prices sank more than $20, or -1.5%, in morning trading Thursday. Gold’s intraday per-ounce price of $1,323.50 represents a more than two-week low for the precious metal, which had been rising steadily throughout 2016.
Traders have been flocking to gold for technical reasons, while investors traditionally look at it as a hedge against inflation and/or equities market drops.
With those worries now dissipating, the yellow metal is losing a bit of its luster.
As gold prices themselves drop, so too does the SPDR Gold Trust (ETF) (NYSE:GLD). The most popular gold ETF fell $2.13 (-1.66%) in premarket trading to $126.19. Despite those early losses, GLD is still up 25% year-to-date.
Gold Miners on the Decline, Too
The companies most benefitted by gold’s recent rally have been gold miners. These formerly-beleaguered plays — some on the verge of potential bankruptcy — have exploded this year as speculators bet on gold’s continued recovery. With gold prices slumping this morning, however, miners are on watch.
The Market Vectors Gold Miners ETF (NYSE:GDX) fell $0.84 (-2.76%) to $29.56 in premarket trading Thursday.
If leveraged ETFs are your thing, note that Direxion Daily Gold Miners Bull 3X Shrs (NYSE:NUGT), which tracks the gold miners index with 3x leverage, is getting smoked this morning, down $13.43 (-8.24%) to $149.52.