Disappointing May jobs data released last week arguably reaffirm the notion that gold and the related exchange traded funds, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), remain important portfolio diversifiers.
Not only that, but with many market observers believing the slack May jobs report means the Federal Reserve will not be able to raise interest rates this month or in July, gold ETFs could offer investors more upside as rates remain low.
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Some analysts still believe that is possible gold ascends to $1,500 per troy ounce. Gold bullion prices have surged almost 20% this year as the Fed previously signaled it would slow the pace of interest rate normalization this year – higher interest rates typically weigh on gold prices since the hard asset provide no yield and would become less attractive to higher-yielding conservative debt assets in a rising rate environment.
“Boris Schlossberg, managing director of FX strategy at BK Asset Management, believes gold is also headed for another rally, but its determinant won’t just be the dollar,” reports CNBC. “Schlossberg also points to China, a major gold buyer, as a key determinant of the precious metal’s future levels as the country’s yuan continues to weaken.”
The Federal Reserve previously signaled it would raise rates soon if the employment situation improved and economic data remained consistent with a pickup in growth.