Daily ETF Roundup: UNG Jumps On Chinese Demand, GDX Tumbles As Gold Loses

by on December 13, 2011 | ETFs Mentioned:

Stocks started off the day strong as hopes that the Fed would bring good news had most major indexes up over 1% upon market open. But as Ben Bernanke and company usually do, they left the door open for further QE, sparking a massive sell-off that quickly threw equities back into negative territory. The Dow lost 66 points while the S&P 500 sink by nearly 0.90%. The greenback had a second strong day against the euro which has yet to halt its skid over the past few weeks. Gold, though starting off the day in positive territory, took a harsh hit of -1.9%, putting the precious metal below $1,650/oz for the first time in recent memory. One of the only winners on the day, surprisingly, was crude oil, which jumped by 2.5% to close above the triple digit mark [see also 12 High-Yielding Commodities For 2012].

Perhaps the straw that broke the camel’s back for the day was the Fed pointing “to turmoil in Europe as a big risk to the economy, leaving the door open to a further easing of monetary policy even as it noted some improvement in the labor market” write Mark Felsenthal and Pedro da Costa. With their backs seemingly against the wall, the hints of a fourth quantitative easing by the Fed has investors around the world groaning at the thought of even more asset purchasing. It was this very thought that spooked investors from European equities as it appeared that for a short period of time, European leaders might implement a similar plan for their indebted nations. In an effort to keep you up to date on all of the news and happenings around the world, we outline two of the most notable ETF performances on the day [see also The Five Biggest ETF Inflows Of 2011].

One of the biggest ETF winners on the day came from United States Natural Gas Fund LP (UNG), which jumped 0.84% during Tuesday’s session. With natural gas prices sitting at their lowest levels in history, investors have been frustrated by the back and forth performance that this massive commodity ETF has exhibited. Today’s gains stemmed from China, where policy makers are making a conscious effort to boost natural gas use to help the environment. “Demand in China may more than triple this decade, with consumption for electricity generation increasing more than fourfold, according to the International Energy Agency” writes Ryan Woo. The potential surge in natural gas demand has investors licking their chops for a bull run in a fund that has been stuck in a major bear rut [see also 25 Ways To Invest In Natural Gas].

One of the biggest ETF losers on the day was the Market Vectors TR Gold Miners (GDX), which sank a dismal 3.2% on the day. Gold prices, along with this fund, enjoyed gains to open the day, as investors were hoping to hear positive comments from the Fed. But after analysts and experts read between the lines of the Fed’s statement, the threat of QE4 took a swing at gold, kicking the precious metal into the gutter. Consequently, GDX lost more than the commodity due to its leveraged nature as a mining fund; miners often feature high betas that make them bigger movers than the actual commodities they rely on [see also ETF Insider: Stay On The Defense].

Disclosure: No positions at time of writing.