Gold Mining ETFs Swoon As Fed Gives Dollar A Boost
New York (Dec 17) Gold mining ETFs tanked a day after the Fed's first rate hike in nearly a decade sent the dollar soaring, weighing on precious metals. Stocks took a breather as investors digested the historic policy move and awaited the latest jobless numbers.
On Wednesday, policy makers' dovish tone on the pace of tightening in 2016 stoked a broad stock market rally.
SPDR S&P 500 (ARCA:SPY) gave up some of those gains on the stock market today. The ETF's underlying index is a proxy for the broad U.S. stock market.
The dollar rallied a day after the Federal Reserve raised interest rates for the first time in nearly a decade.
The dollar rallied a day after the Federal Reserve raised interest rates for the first time in nearly a decade. View Enlarged Image
Market Vectors Gold Miners (ARCA:GDX) melted as much as 5.6% as the dollar surged against a basket of major world currencies.
Gold and other precious metals are priced in U.S. dollars, so a strengthening dollar makes them more expensive for foreign investors.
Further rate increases in the new year could weigh further on gold. A non-yield-bearing asset, gold becomes less attractive to investors as interest rates go up.
PowerShares DB US Dollar Bullish (ARCA:UUP) popped 0.9% in intraday trade.
The ETF goes long the greenback and short other major world currencies, using futures.
The yen, euro and British pound all fell against the U.S. dollar Thursday.
SPDR Gold Shares (ARCA:GLD), the largest exchange-traded fund backed by physical gold, gapped down 2% to its lowest point since October 2009.
GLD is 19% off its January high of 125.58. It has given up 12% in the past year.
Energy and materials declined most among S&P 500 sectors in late morning trade. Real estate bucked the downtrend, eking out a gain.