Gold ETFs Fall as Investors Digest Fed Minutes, Nonfarm Payrolls

January 4th at 9:44am by John Spence

Precious metals ETFs such as SPDR Gold Shares (NYSEArca: GLD) and iShares Silver Trust (NYSEArca: SLV) were down about 1% in early trading Friday after the Labor Department said the U.S. economy added 155,000 jobs last month, roughly in line with expectations.

Gold and silver ETFs fell for a second day as investors reacted to the minutes of the latest Fed meeting showing some officials want to scale back or even halt the central bank’s bond-purchase programs.

“We’ve had a big reaction from gold to the Fed minutes, and the dollar has strengthened,” Standard Chartered analyst Daniel Smith said in a Reuters article. “People are concerned that the quantitative easing program (QE) may be withdrawn sooner rather than later.”

Gold futures traded as low as $1,626 an ounce on Friday, the lowest level in over four months.

“The swing comes at a crucial time as investors struggle to predict the yellow metal’s 2013 trajectory, rushing to lower forecasts and increasingly questioning the robustness of gold’s 12-year bull market,” WSJ.com’s The Source blog reports. Gold prices are on track for the sixth consecutive weekly drop, the worst streak since 2004, according to the post.

Still, some analysts are bullish on gold for 2013 despite speculation over the Fed’s next move as central banks keep lax monetary policies in place.

“Gold prices will recover this year,” HSBC’s Jim Steel said in a Dow Jones Newswires report, citing central banks’ easy-money policies and low interest rates, two factors that tend to stoke demand for gold as an alternative investment.

Indeed, gold traders “expect prices to rebound from the longest weekly losing streak in eight years as mounting concern that U.S. lawmakers are doing too little to control the budget deficit spurs demand for a protection of wealth,” Bloomberg News reported Friday.

“Euphoria over the fiscal-cliff avoidance could be short lived as all problems are not solved yet,” said Frederique Dubrion, chief investment officer of Blue Star Advisors, in the story. “There’s still a huge amount of debt. Gold is nobody’s liability, it’s the ultimate alternative currency.”

SPDR Gold Shares

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Full disclosure: Tom Lydon’s clients own GLD and SLV.

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.

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