Gold, Treasury ETFs Feel the Heat

March 15th at 12:30pm by John Spence

Exchange traded funds tracking two asset classes favored as “safe havens” in recent years – gold and U.S. Treasury bonds – have both been hit by sharp sell-offs this week.

Gold prices have been pushed firmly below $1,700 an ounce after the Federal Reserve didn’t hint that more easing measures were forthcoming. The central bank does remain committed to keeping short-term rates near zero until late 2014. [Gold ETFs Hit by Fed Outlook, Stronger Dollar]

ETFs that invest in long-term U.S. Treasury bonds have also been hit this week. Yields on the 10-year note have jumped from about 2% to 2.3%. [Rising Yields Punish Treasury ETFs]

“Yesterday saw two potentially significant moves in markets we follow: sharp breakdowns on good momentum in both gold and Treasury futures,” Waverly Advisors said in a note Thursday. “Both of these markets are set up well on higher timeframes for larger moves, so traders should be extremely cautious about holding positions against these moves—be careful of fading these sharp breakdowns.”

It warned: “Be careful of buying weakness in Treasuries; there is a high probability of at least one more leg down following any consolidation, and the possibility that this is the beginning of a larger breakdown.”

Vanguard Extended Duration Treasury ETF (NYSEArca: EDV)

ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)


The opinions and forecasts expressed herein are solely those of John Spence, 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.

Tickers

EDV SGOL