Gold shares and exchange traded funds (ETFs) are raking in the assets, as the metal is up 21% this year. But many traders are beginning to wonder whether market conditions are in place to continue gold’s momentum.
Analysts and market watchers say that the fundamentals driving gold to the highs its seen are still in place, and they are expected to continue throughout the year. Bloomberg reports that some of the forces till at work are:
- Decreasing faith in the U.S. dollar. The Federal Reserve’s program of quantitative easing will increase the U.S. money supply, making dollars cheaper and pushing investors to assets that will better hold their value.
- International tension. U.S. investors fear Vladimir Putin, distrust Iran, worry about Islamic militancy, fret about the proliferation of nuclear weapons, and wonder whether Pakistan, Saudi Arabia and Iraq can maintain political stability.
- Looming Inflation. Although tame at the moment, inflation might make a comeback if Uncle Sam pumps up the money supply even more.
- Government gold purchases. Sovereign wealth funds in India, Saudi Arabia and other countries have been buying physical gold, pushing up the demand. [ETF Spotlight: GDX.]
Precious metals across the board have hit highs this year. ETFS Physical Precious Metal Basket Shares (NYSEArca: GLTR) is a potentially safer bet for those who are just beginning to invest in the metals because it’s diversified in gold, silver, platinum and palladium. It makes sense for those considering getting into metals at this level. [Gold ETF Soars To Record Highs.]
Ben Baden for US News & World Report says that GLTR could also be a long-term holding for investors who are interested in diversifying their portfolio, as opposed to more sophisticated investors who are making strategic bets on a single metal for a shorter period of time.
For more articles about investing in gold, visit our gold ETF category.
- SPDR Gold Shares (NYSEArca: GLD)
- Market Vectors Gold Miners ETF (NYSEArca: GDX)
- Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ)
- ETFS Physical Precious Metal Basket Shares (NYSEArca:GLTR)
For full disclosure, Tom Lydon’s clients own shares of GDXJ.
Tisha Guerrero contributed to this article.
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.