Why Did Gold Speculators Turn Bearish?



Bearish outlook

With the great downfall seen in the prices of precious metals, investors now seem set to cut down their long positions on gold especially. Due to the speculation on the Federal Reserve hiking the interest rates, gold prices are trading close to their five-year low prices. Gold futures on COMEX fell almost 7.5% in the past ten days. Such steeply sliding prices have caused gold enthusiasts to reverse their position and finally turn bearish. Holdings in exchange-traded products fell almost 27 metric tons last week, the largest fall since July.

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With an almost 68% of probability of a hike in the interest rate, precious metals have been in a free fall right since the FOMC (Federal Open Market Committee) members met in the October. The chances are up from the 56% probability of hiking seen before the meeting. According to Bloomberg data, investors sold gold in ETFs for a sixth day. Assets are at the lowest mark seen since the month of August.

Tracking miners and ETFs

The ETFs that saw a down day on November 6 along with precious metals include Sprott Gold Miners ETF (SGDM) and the VanEck Vectors Junior Gold Miners ETF (GDXJ). These two ETFs fell 4.4% and 3.9%, respectively. The five-day trailing returns for both of these indicators have also been negative.

The mining stocks that fell on November 6 include Sibanye Gold (SBGL), Aurico Gold (AUQ), and Primero Mining (PPP). Mining companies were affected by the fall in the price of gold and other precious metals too. These three companies together contribute almost 3.8% of the VanEck Vectors Gold Miners ETF (GDX). The GDX indicator itself witnessed fell 4.4% on November 6. The five-day trailing loss of the GDX ETF is almost 10%.


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