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You Don’t Want to Know What Happens to Mining ETFs if Gold Breaches $1,000


Again under siege with gold trading at its lowest levels since early August, mining ETFs such as the Market Vectors Gold Miners ETF (GDX) have plenty to worry about, including what life could look like if bullion falls below $1,000 per ounce.

Gold futures are trading around $1,286 per ounce at this writing. The yellow metal turned in its best quarterly performance of the year in third quarter as the SPDR Gold Shares (GLD) rose 5.8%, but GDX, the largest gold mining ETF, eked out a gain of just half a percent.  Tuesday’s downdraft  could be a sign that October is set to live up to its billing as dreadful month for gold bulls.

Since the start of this century, October ranks as merely the tenth-best, or third-worst, month in which to own gold. That is only slightly better than the 1990s, when October was the second-worst month for gold. In the 1980s, October was gold’s tenth-best month and overall since 1980, October is the worst month for the yellow metal. [Gold's Short-Lived Fed-Fueled Gains]

Things could worse before they get better for the already embattled miners. With gold prices struggling to stay above $1,300 an ounce, the spotlight is back on which miners are burning cash and which ones can profitably extract bullion from the earth when spot prices tumble to $1,300 or $1,200 per ounce or even lower. According to a Citigroup research note, global gold on mine unit costs rose 12% year-over-year in the June 2013 quarter. Due to the combination of rising costs and falling gold prices, gold miners have witnessed a quick contraction in margins. [Mining ETFs Flirt With Disaster After Rocky September]