Barrick Gold Corporation (USA) (ABX), Goldcorp Inc. (USA) (GG): Investors Are Leaving Gold, and Gold Miners Are Cutting Back

“The prospect of the U.S government tapering quantitative easing by the end of 2013 had a disproportionate downtrend impact on the gold price as some investors in ETFs saw their key rationale for seeking a safe haven in gold fade,” the World Gold Council report said.

During the second quarter, over 400 tonnes of gold flowed out of ETFs because of signs of a strengthening U.S economy and the Fed loosening its monetary policy. Source: World Gold Council

Investors will closely analyze economic data, such as U.S unemployment claims to monitor whether the Fed will ease or tighten its monetary policy. If disappointing economic data surfaces, equity markets fill with uncertainty. Investors could flock to gold futures or gold-backed ETFs as a safe haven to hedge against a weaker U.S economy, shooting precious metal prices higher and causing gold miners to generate higher returns from their lower-cost assets.

On September 17, the Federal Open Market Committee will hold a two-day meeting to discuss economic issues and address their decision on ending the monthly bond-purchasing program by mid-2014.

Bottom line
Investors have pulled away from gold futures and gold-backed ETFs, causing gold prices to plummet. Barrick Gold and Goldcorp are trying to improve their liquidity and capital structure. Gold miners are cost cutting and optimizing their asset portfolios to generate positive cash flow in the future. Gold will become increasingly sensitive to economic data in the coming weeks before the Federal Reserve meeting in mid-September. News on whether or not the Fed will taper quantitative easing could determine if outflows in gold-backed ETFs continue or reverse.

The article Investors Are Leaving Gold, and Gold Miners Are Cutting Back originally appeared on Fool.com and is written by Christopher DeSousa.

Christopher DeSousa has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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