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Gold ETFs Dull on Fed Rate Bets, Strengthening Dollar

After a better-than-expected July jobs report, speculation over a potential Federal Reserve rate hike this year and a strengthening U.S. dollar pummeled gold and miners-related exchange traded funds.

On Friday, the VanEck Vectors Gold Miners ETF (GDX) fell 3.2% and VanEck Vectors Junior Gold Miners ETF (GDXJ) declined 3.3% while the SPDR Gold Shares (GLD) dropped 1.7%.

Comex gold futures were down 1.8% to $1,343.4 per ounce on Friday.

Meanwhile, bearish ETF bets on gold miners were among the best performers on Friday. The Direxion Daily Gold Miners Index Bear 3X Shares (DUST) surged 9.2%, Direxion Daily Junior Gold Miners Index Bear 3X Shares (JDST) jumped 10.1%, ProShares UltraShort Gold Miners (GDXS) increased 6.2% and ProShares UltraShort Junior Miners (GDJS) advanced 6.2%.

SEE MORE: Hot Spots Short-Term ETF Traders Are Targeting

Nevertheless, bullion and precious metals miners are still among the best performing assets of the year, with GDX up 127.6%, GDXJ 166.3% higher and GLD up 28.0% year-to-date.

SEE MORE: Gold Miners ETFs Confirm Strength Against Broad Market

Gold and the miners group slipped Friday on rising bets the Fed would raise interest rates soon, with some eying a September rate hike, after the U.S. economy added 255,000 jobs in July.

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“It shows the economy, from a labor perspective, is heading in the direction that the Fed wants,” Doug Duncan, chief economist at Fannie Mae, told Reuters.

Higher interest rates weigh on gold and other hard assets as the commodity pays investors nothing and struggles to compete with yield-generating assets when borrowing costs increase.

Additionally, a strengthening U.S. dollar also weighed on precious metals. The U.S. Dollar Index (DXY), which tracks the greenback’s movement against a basket of major global currencies, rose 0.4% to 96.2 on Friday. A stronger makes USD-denominated gold costlier to foreign buyers.

For more information on the gold market, visit our gold category.

VanEck Vectors Gold Miners ETF

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