Let’s face it: 2013 has been a bad year to be a gold investor.
Year to date, gold prices have lost a quarter of their value, falling from the $1,670 range on Jan. 1 to $1,242 an ounce as of this morning. If it holds, it will mark the first annual decline for the yellow metal since 2000. Gold prices are also on pace for their worst percentage drop-off in more than 20 years.
Naturally, the decline in gold has weighed heavily on gold stocks. The Market Vectors Gold Miners ETF (NYSE: GDX) has plummeted 53% this year, its largest yearly decline since the fund was created back in 2006.
Improvements in the U.S. economy and an absence of fear on Wall Street have contributed to gold’s rough year. Not that any investor is complaining about the current conditions.
As the perennial “safety play,” gold grows in value during periods of great uncertainty or high inflation. Neither of those is occurring right now. Despite the Fed’s ongoing $85 billion-a-month bond buyback program, the inflation rate is at a four-year low of 1% right now. Meanwhile, the volatility index – the VIX – is close to five-year lows.
The tide may eventually turn for gold. Once the Fed pulls the plug on QE3, investors may flock to gold – and gold stocks – as a safety play. For now, though, it’s safe to say that 2013 has been a lost year for gold.