Gold, the most sought-after precious metal, seems to have lost its sheen lately. After delivering 12 consecutive years of positive returns, gold is slated to incur its first annual loss in a period of 13 years, having slid 24% since the beginning of this year.
This trusted metal, considered as a safe-haven, lost its appeal to other asset classes of late. Equity won the race over gold, delivering stellar returns so far this year. The gold-backed funds have plunged almost in the double digits year to date. (Read: Energy ETFs Surge on Q3 Oil Service Earnings Beats)
Before we take a closer look at some of the gold ETFs, here are some insights as to what led this yellow metal into a bear market.
Reasons for Decline
The biggest reason for the fall in gold prices seems to be Fed’s consideration of a gradual exit from its bond buying program. With the global economy slowly picking up, gold has fallen out of favor. Investors have been dumping gold as they believe that the Fed will ultimately bring its monetary stimulus policy to an end. The end of the stimulus program might bring the era of low interest rates to an end, reducing gold’s appeal.
Moreover, a decline in the inflation level across the globe, particularly in the developed economies also diminished gold’s value as a hedge against rising prices.
The series of events led to a bear trend in the bullion market, pushing it below $1,300 an ounce last week, almost 33% below its record high of $1,921.15. Though currently the metal is trading a little higher than $1,300 an ounce, the metal is down almost 27% over the past 1 year, marking the worst annualized performance since 1985. (Read: 3 Biggest ETF Winners from the 3rd Quarter)
This was felt in gold ETFs with SPDR Gold Shares (NYSEARCA:GLD), ISHARES Gold Trust: (NYSEARCA:IAU) and Physical Swiss Gold Shares (NYSEARCA:SGOL), all delivering negative returns of around 3% last month. In fact, all the three ETFs have eroded around 20% each from an investor’s portfolio so far this year.(...)Click here to continue reading the original ETFDailyNews.com article: Avoid Gold ETFs For The Short-Term?You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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