3 signs investors are fleeing gold

Is it a temporary bump in the road or the beginning of the end? Either way, there are worrying signs that investor interest in gold and silver is waning.

We believe the trend is temporary, but there are worrying signs that investor interest in gold is waning. Here are three:

1) ETFs are pouring physical gold into the market. The impact of gold and silver ETFs on bullion prices cannot be understated, and last year, gold ETFs saw the lowest level of bullion intake since their inception in late 2004 (per IBTimes). That’s worrying enough, but in 2012, gold-based ETFs are actually selling off more gold than they’re taking in. That’s flooding the market with physical gold. Already in April, ETFs have sold off more than six tonnes of gold.

2) “The froth is coming off.” Pundits and authors have started venturing into the press with warnings that the gold and silver “bubble” is about to pop. One of the leaders of the bubble camp is Yoni Jacobs, author of Gold Bubble: Profiting from Gold’s Impending Collapse – a book that hit shelves yesterday. “The froth is coming off,” he says in a recent interview.

His reasoning for sounding the warning bell? Sellers have started out-numbering buyers. Last September, when the bottom fell out under gold prices, volume was extremely heavy – and that’s a bearish sign for the future. In addition, gold mining stocks are performing like gold’s glory days are long since past. The Market Vectors Gold Miners ETF (GDX) is down 20 percent over the past six months while the Gold ETF (GLD) has essentially stayed flat.

3) India’s government is trying to put the brakes on gold consumption. The government of the world’s largest gold consumer and importer is attempting to slow gold imports and consumption via taxes. The country doubled gold import duties from 2 percent to 4 percent. In addition, they’re levying a 0.3 percent tax on gold jewelry as the country’s struggling to contain a growing trade deficit.

The new taxes and the weak rupee have collided to push down gold jewelry and bullion sales by as much as 70 to 80 percent on a daily basis, per the Economic Times. “The demand is almost negative compared to previous years,” Ashish Mundhra, director of Chennai-based Mundhra Bullion, told the paper.

Still, not every agrees this is the end of the end for gold. And we definitely don’t either. In fact, we see this as one of the best time to buy shares in gold and silver mining stocks. We could be wrong, but we don’t think the U.S. economy is out of the woods yet. And with Bernanke at the helm of the Federal Reserve, we’re a lot more nervous about the future of the dollar than we are over the future of gold and silver.


Top 10 best gold and silver ETF funds

Here’s a look at the Top 10 best gold and silver ETFs on U.S. exchanges ranked by volume. The iShares Silver Trust (SLV) trades more than twice as many shares as its nearest competitor GLD.

Here’s a look at the Top 10 best gold and silver ETFs that trade on major U.S. exchanges. We’ve ranked them by volume, as some of the niche ETFs in the precious metals market are so thinly traded they can be subject to extreme price volatility or – in some cases – underperformance when compared with the underlying commodities they’re supposed to track.

iShares Silver Trust (ETF) (NYSE:SLV), Volume 38 million shares The world’s largest silver ETF, the iShares Silver Trust currently holds 10,764 metric tons of silver. That’s a lot of ingots. The SLV is the second-strongest performer on our list of the Top 10 gold and silver ETFs, getting shown up only by the Ultra Silver ETF (a double-long silver ETF). With an average volume around 38 million, SLV is easily the most active gold and silver ETF on the market. 12-month performance: +107 percent


SPDR Gold Trust (ETF) (NYSE:GLD), Volume 17.4 million shares Among the most well-known ETFs on the exchanges, it’s more common to hear the SPDR Gold Trust referred to by its ticker: GLD (that’s when you know you’ve made it). The GLD currently has a market cap of more than $56 billion. 12-month performance: +26 percent


Market Vectors Gold Miners ETF (NYSE:GDX), Volume 5.8 million shares The GDX seeks to mirror the NYSE Arca Gold Miners Index – an index that’s weighted toward large-cap gold mining stocks. The index’s single largest component stock is Barrick Gold Corporation (USA) (NYSE:ABX), which makes up nearly 17 percent of the index’s weighting. 12-month performance: +29 percent


iShares Gold Trust (ETF) (NYSE:IAU), Volume 5.2 million shares A physical gold ETF, the iShares Gold Trust has largely played second fiddle to GLD. IAU has a market cap of $5.4 billion while GLD’s market cap exceeds $56 billion. 12-month performance: +26 percent


SPDR S&P Metals and Mining (ETF) (NYSE:XME), Volume 2.8 million shares The SPDR S&P Metals & Mining ETF mirrors the S&P Metals & Mining Select Industry Index by buying baskets of shares in metals and mining stocks. The index is comprised not just of precious metals but steel, coal and consumable fuels, aluminum and other metal and mining-related stocks. Most recently, the ETFs largest holding was Australian iron ore and coal producer Cliffs Natural Resources Inc. (NYSE:CLF), which made up 4.71 percent of the fund’s holdings. 12-month performance: +26 percent


Market Vectors Junior Gold Miners ETF (NYSE:GDXJ), Volume 1.8 million shares The Market Vectors Junior Gold Miners ETF mirrors the Market Vectors Junior Gold Miners Index. Since the Junior Gold Miners Index is comprised of small- and medium-cap gold mining stocks, the GDXJ is subject to more volatility than the GDX, which is geared toward larger mining companies. When the industry’s doing well, GDXJ does even better. 12-month performance: +53 percent


ProShares Ultra Silver (ETF) (NYSE:AGQ), Volume 1.59 million shares The AGQ ETF invests in silver futures and forwards as it seeks to return 2X the daily returns of silver as measured by the U.S. Dollar fixing price for delivery in London. It’s a very bullish bet that silver’s going to rise in the coming days. Just don’t be caught holding it if sentiment shifts away from the metal. 12-month performance: +266 percent


PowerShares DB Gold Double Long ETN (NYSE:DGP), Volume 476,000 shares DGP invests in gold futures contracts as it attempts to return 2X the daily price of gold bullion as measured by movements in the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold. 12-month performance: +53 percent


ProShares Ultra Gold (ETF) (NYSE:UGL), Volume 223,000 shares UGL seeks twice (200%) the daily performance of gold bullion by investing in gold futures and forwards. The fund has shot up 12 percent over the past month. 12-month performance: +51 percent


ETFS Gold Trust (NYSE:SGOL), Volume 151,000 shares SGOL is designed to reflect the performance of the price of gold bullion backed by physical gold that’s held in Zurich, Switzerland. The fund’s physical gold conforms to the London Bullion Market Association’s (LBMA) rules for Good Delivery. 12-month performance: +26 percent


Honorable Mention: Direxion Daily Gold Miners Bull 2X Shares (NYSE:NUGT), Volume 28,500 shares The newest of the offerings on our list, NUGT seeks to return 200 percent of the price performance of the NYSE Arca GoldMiners Index. Interestingly, the fund counts GDX (another gold mining ETF listed above) as its largest holding. 3-month performance: -4 percent



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