Gold ETFs for $1,800 or $1,600 an Ounce

March 12th at 12:44pm by Tom Lydon

Gold exchange traded funds seem to be coiling for their next big move with the precious metal’s price hovering around $1,700 an ounce in March.

Gold ETFs such as SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) are sitting on gains of about 10% this year despite the sideways trading so far this month. [ETF Chart of the Day: Gold]

Whether gold next sees $1,800 or $1,600 an ounce this year depends largely on the outlook for more quantitative easing from the Federal Reserve. [List of Top Gold ETFs]

Loose monetary policies from the Fed and other central banks have been a major driver of the historic rally in gold the past few years. Many investors view gold as a hedge against currency debasement. [Gold ETFs and Inflation]

Investors in gold ETFs are sending bullish signals on the precious metal. ETF bullion holdings are at a record high of more than 2,400 metric tons. [Gold ETF Bullion Holdings Rise to All-Time High]

In fact, gold ETF investors haven’t been shaken at all by the steep pullback on Feb. 29 when prices lost as much as $100 an ounce.

“Normally a big drop in gold prices will send gold ETF investors heading for the sidelines, but there was nary a reaction to that big drop,” according to the McClellan Market Report. “In fact, total assets in GLD and IAU, the two biggest gold bullion ETFs, actually rose slightly that day, and have continued upward in the days since then.  It is as if investors viewed that sell-off as more of a buying opportunity than a reason for worry.”

Investors with a bearish outlook on gold can also use ETFs to profit from declines or hedge. Inverse ETFs that short gold include ProShares UltraShort Gold (NYSEArca: GLL), PowerShares DB Gold Double Short ETN (NYSEArca: DZZ), PowerShares DB Gold Short ETN (NYSEArca: DGZ) and VelocityShares 3X Inverse Gold ETN (NYSEArca: DGLD). Some of the funds use leverage, which means more volatility.

ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)


Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.