More Upside Seen for Gold ETFs

  • Even with gold’s stellar start to 2016, some technical analysts see more upside
  • Gold prices strengthened this year as market volatility triggered safe-haven demand
  • Still, bullion’s bounce has not convinced all market observers that a sustained rally is in store

The SPDR Gold Shares (NYSEArca: GLD), the world’s largest physically-backed gold ETF, is up more than 18% year-to-date, a stellar run in less than three months time for an ETF that had been beaten up in each of the previous two years.

Even with gold’s stellar start to 2016, some technical analysts see more upside on the way as central banks around the world employ negative interest rates. Lower interest rates are viewed as a positive catalyst for gold.

Gold prices strengthened this year as market volatility triggered safe-haven demand. Nevertheless, more long-term investors who are seeking insurance through a gold play should not throw everything into the precious metal. A portfolio allocation of about 5% is adequate for a partial hedge against any more trouble ahead.

Advisors and technical analysts are forecasting a move to the $1,400 to $1,450 per troy ounce area for gold this year, which implies significant upside from current levels.

Rich Ross of Evercore ISI told CNBC “he sees much more upside for the yellow metal, now that it has surged past its 150-week moving average. Ross said gold has stayed below that technical indicator since 2013, and may now return to the level where it first changed trends.”

Still, bullion’s bounce has not convinced all market observers that a sustained rally is in store. Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store.