March 16, 2007 at 1:02 pm by Tom Lydon
Exchange traded funds (ETFs) that buy gold have helped raise the price of the bullion. Around the world, buying gold via ETFs accounted for 19% of the 43.5 million ounces bought by investors in 2006. The U.S. gold ETFs include streetTRACKS Gold Shares (GLD) and iShares Comex Gold Trust (IAU). The current high levels of gold buying is likely to continue through this year. Simon Constable of TheStreet.com reports the tonnage of gold actually purchased will depend on how investors view the world – politics, oil supply, and the strength of the dollar all come into play.
Demand can always turn, and inventories can continue to grow, as they have in London and Dubai. New estimates of annual production could increase up to 10% and a global "gold rush" may soften the prices to an equilibrium level of $350-$400.
IAU and GLD are both up about 1.5% for the year. The two ETFs apparently move in tandem as the chart below illustrates.
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