Gold ETFs Could Strengthen Ahead of Chinese New Year

January 14th at 8:24am by Tom Lydon

Gold prices and related exchange traded funds have been hovering around the 200-day moving average but seasonal demand from Asia could boost the precious metal as the Chinese Lunar New Year approaches.

SPDR Gold Shares (NYSEArca: GLD) has declined 6.7% over the past three months as gold futures trade near $1,670 an ounce. [Gold ETFs: Bullion Prices Up for 12th Straight Year]

“After a poor start to the week on Monday, precious metals managed to make some headway yesterday, with gold eventually pushing past the $1,660 resistance level,” Standard Bank said in a note, reports Tom Jennemann for FastMarkets. “The push higher came despite some dollar strength during US trading hours, as optimism over physical demand lent the yellow metal. With Chinese Lunar New Year celebrations approaching … we should see the usual seasonal increase in physical demand.”

The Chinese New Year celebrations start on Feb. 10.

“We find ourselves just ahead of Chinese New Year, which seasonally is one of the strongest times of the year for gold demand, and seven weeks away from the new deadline in the U.S. political system, and we’re surprised at how low gold prices are,” Natixis analyst Nic Brown said in a note, International Business Times reports. “If there was a reason for buying gold, you’ve got two good ones there.”

Physical gold traded on the Shanghai Gold Exchange hit a record high this week, with 19,500 kilograms of gold changing hands Monday, reports Matt Day for the Wall Street Journal.

Commerzbank believes that Chinese buyers “have evidently been taking advantage of the lower prices recently to purchase gold” ahead of the Chinese New Year holiday.

Additionally, Deutsche Bank analysts expect higher demand for gold as an investment out of China will help bring prices above $2,000 an ounce by the end of the year.

However, concern over the end of the Federal Reserve’s stimulus policies has put a lid on gold gains – gold is seen as a safe hedge against the loose monetary policy and a depreciating dollar. The Fed’s last policymaking meeting revealed a growing debate over cutting short its $85 billion a month purchasing plan. [Gold ETFs Weigh Fed Comments, Fiscal Cliff Deal]

Some other physically backed gold ETFs include:

  • iShares COMEX Gold Trust (NYSEArca: IAU)
  • ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
  • ETFS Physical Asian Gold Shares (NYSEArca: AGOL)

SPDR Gold Shares

gold-etf-gld

For more information on gold, visit our gold category.

Max Chen contributed to this article.

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.

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