Investors were driven into gold’s safe arms by a disappointing unemployment report that was the country’s worst in 26 years. (The unemployment report).

Allen Sykora for The Wall Street Journal reports that December gold peaked at $1,101.90 an ounce, a fresh record for a most-active contract on Comex. December gold eventually settled at $1,097.70 an ounce, while silver was up 11 cents to $17.52. (Can gold ETFs and prices go higher?)

Who’s going to drive gold prices? Although gold is typically driven by economic factors, these days  investors and traders are in the driver’s seat. Many analysts expect the uptrend to stick around for the time being. Eric Lam for Financial Post reports that the seasonal impact that drives gold is also a factor, as September to December has guided gold higher over the past decade. (Gold’s use as an inflation hedge).

Before investing in gold or other commodities, be sure you have a stop loss in place that you can execute when the trend winds down. (How to employ a stop loss).

For more stories about gold, visit our gold category.

• SPDR Gold Shares (NYSEArca: GLD): up 23.7% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 21.9% year-to-date

• iShares COMEX Gold (NYSEArca: IAU): up 23.5% year-to-date

• ETFS Physical Swiss Gold (NYSEArca: SGOL): up 7.3% since inception

What’s driving gold prices today isn’t necessarily what drove them 40 or 100 years ago.

• Today, wealth preservation is the key driver for gold investment. Investors want to protect their assets, and gold holds its value, reports Eric Lam for the National Post.
• For most of the last decade, gold has performed well between September and December. Some investors may be considering these seasonal factors.
• The International Monetary Fund (IMF) sold 403 tonnes in September, and rumor has it that China is interested in it.
• India is also stepping up its gold holdings to 558 tonnes, up from 358 tonnes, as it seeks to diversify away from the U.S. dollar.
• In an attempt to revitalize the U.S. economy, the federal government has turned to printing massive amounts of money. The dollar has lost ground against its counterpart currencies, which has led many to believe that inflation is on the horizon.  As we all know, a good hedge against inflation is gold. (Other ways to hedge against inflation).
• Supply is becoming constrained. Of the world’s three biggest gold producers (China, Australia and South Africa), only China has increased production.

What’s the appeal of gold for the average investor? Lakshmi Iyer of Kotak Mahindra Mutual Funds states:

• Gold offers diversity, liquidity, safety and security to investors.
• Gold reduces the risk of losing money in the event that a preferred asset underperforms or when a specific sector is not doing well. (How to utilize precious metals).

For more stories on gold, visit our gold category.

Gaining access to gold is easy  through the use of the following ETFs:

• SPDR Gold Trust (NYSEArca: GLD): up 20.2% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 20% year-to-date

• PowerShares DB Gold Fund (NYSEArca: DGL): up 18.4% year-to-date

• ETFS Physical Swiss Gold Shares (NYSEArca: SGOL): up 7.1% since its inception

For full disclosure, Tom Lydon’s clients own shares of GLD.

Kevin Grewal contributed to this article.

Gold has declined slightly from its highs down to a three-week low, reports Jan Harvey for Reuters. One metals analysts notes that while interest has waned slightly, it appears to be a temporary pause because the long-term bull factors for gold are still there. (What’s driving gold’s uptrend?)

When considering investing in gold ETFs, Don Dion of the Street.com suggests tailoring your choice to your preferences about the quantity of underlying gold, liquidity concerns and geographical location. For more stories on gold, visit our gold category.

There are three choices you have when it comes to playing gold through ETFs:

• SPDR Gold Shares (NYSEArca: GLD) is up 17.7% year-to-date and has seen an astonishing increase in assets, surpassing the $35 billion mark as of Oct. 23.  Additionally, GLD is the largest ETF when measured by assets. Gold that underlies GLD is held in the form of allocated 400-ounce London Good Delivery bars in the London vault of HSBC (NYSE: HSB) Bank USA, or in the vaults of subcustodians.

• iShares COMEX Gold (NYSEArca: IAU) is up 17.6% year-to-date and shares of IAU are backed by gold held by the custodian in the vicinity of New York, Toronto, Montreal, London and potentially other locations in the future.

• Physical Swiss Gold Shares (NYSEArca: SGOL) is up 4.9% since its inception on Sept. 9 and has $201 million in assets as of Oct. 23.  SGOL has an external auditor inspect the gold holdings twice a year and the gold bar identification numbers are published on the fund’s site. There are also outside audits of the gold holdings. (Why gold is rising).

For full disclosure, Tom Lydon’s clients own shares of GLD.

Kevin Grewal contributed to this article.

More investors are buying positions in gold for the long haul as gold prices have risen 21% for the year on a weak dollar and a surge in government debt, comments Goldbug for Gold News. Where gold is going is a matter of debate:

• Darren Heathcote, head of trading at the Australian section at Investec Bank, says investors are craving diversification and gold is becoming a popular avenue of investment. (Why gold is up).
• Citigroup (NYSE: C) recently put its stamp of approval on gold, announcing an increased six- to 12-month estimate for gold prices from $975/ounce to $1,025/ounce. The decision was based on a weakening U.S. dollar, increase in investor demand and diversification of the dollar reserves and portfolios. (Play Jim Rogers’ views on commodities).
• Historic trends show October to be a slow month for gold and some market observers project a drop in prices, writes Goldbug for Gold News. However, the depreciation of the dollar may continue and offset any sharp correction in gold prices.
• Adrian Koh, analyst at Phillip Futures, explains that a weak dollar invokes fears of inflation and investors are purchasing gold as a hedge. Without any sure changes in the fundamentals for the dollar, gold is likely to stay up.

Where gold ultimately goes is a question that can’t be answered, but investors can take matters into their own hands by protecting themselves with an entry strategy and a stop loss. Read about our trend following discipline here.

For more information on gold, visit our gold category.

• SPDR Gold Shares (NYSEArca: GLD): up 19.5% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 19.5% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 18% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): up 6.5% since inception

For full disclosure, Tom Lydon’s clients own shares of GLD.

Max Chen contributed to this article.

As the dollar gained last Thursday, gold gave up some of its recent gains, reports Sara Lepro for The Associated Press. The government also reported that inflation is relatively subdued, which further dampened gold prices.

Inflation still plays a large role in investor’s appetite for gold. The weakness of the U.S. dollar coupled with the Fed’s unwillingness to raise interest rates (for now) has kept gold prices high in recent weeks. (How to play precious metals).

On Wednesday, gold reached its new high of $1,072 an ounce.

Many pundits seem to be in agreement that new money being printed by the Fed will eventually cause massive inflation and gold will soar to new heights as investors hedge, comments to Peter Gorenstein for Yahoo! Finance.

Mike “Mish” Shedlock, blogger and investment advisor at SitkaPacific Capital Management, is skeptical. He argues that the dollar instead will appreciate since everyone is so pessimistic. Shedlock also believes that gold is a poor inflation hedge, pointing to the period between the 1980s and early 2000s when inflation was steady, but gold prices dropped. Still, Shedlock believes gold will be a good bet because it preserves value during a credit crisis. (Five reasons gold is rising).

For more information on gold, visit our gold category.

• SPDR Gold Shares (NYSEArca: GLD): up 19.3% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 19.2% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 17.7% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): up 6.3% since Sept. 9 inception

Max Chen contributed to this article.

For full disclosure, Tom Lydon’s clients own shares of GLD.

There are many reasons to buy into a precious metals investment, and ETFs can give the desired  exposure to gold, silver and platinum.

Gold. Gold is the godfather of all the precious metals for various reasons, according to Aryeh Katz for Investopedia:

• Gold is a safe haven and is recognized by almost all governments as being a safe store of value
• Inflationary pressures can be hedged with gold (read more on fighting inflation with ETFs here)
• War and political upheaval have always sent people into gold-hoarding mode; an entire lifetime’s worth of savings can be made portable and stored until it’s needed

Moming Zhou for MarketWatch reports that Jim Rogers recently claimed gold will hit $2,000 per troy ounce within the decade. As long as the U.S. dollar continues to weaken, gold prices could continue to rise because gold priced in dollars will become cheaper for overseas buyers (Read 7 more things you should know about gold here).

• SPDR Gold Trust (NYSEArca: GLD)
• iShares COMEX Gold Trust (NYSEArca: IAU)
• PowerShares DB Gold (NYSEArca: DGL)
• ETFS Physical Swiss Gold Shares (NYSEArca: SGOL)
• Market Vectors Gold Miners (NYSEArca: GDX)
• E-TRACS UBS Bloomberg CMCI Gold ETN (NYSEArca: UBG)

Silver. Silver – the “poor man’s gold” – is also a good way to hedge against inflation, and it benefits from its appeal as both an industrial and precious metal. This means that it can be treated as a safe haven investment, as well as an investment for investors looking to benefit from an uptick in industrial demand. A note of caution:  since silver’s market is smaller than gold’s, it can be more volatile. Silver’s main investment approach is determined by factors such as:

• Silver’s role in photography and film has kept demand high; however, the advent of digital cameras has dented the need for silver
• Middle class population growth in emerging markets is great, and this demand for industrial and electrical supplies puts much more pressure on the silver store
• Silver’s use in batteries, superconductor applications and microcircuit markets is a major source of demand
  

• ETFS Physical Silver Shares (NYSEArca:SIVR)
• iShares Silver Trust (NYSEArca: SLV)
  
• PowerShares DB Silver (NYSEArca: DBS)
• E-TRACS UBS Bloomberg CMCI Silver (NYSEArca: USV)
  

Platinum. Platinum tends to fetch a higher price than gold during routine periods of market and political stability simply because it’s much rarer. Other factors affecting platinums price include:

• The greatest demand for platinum comes from automotive catalysts, which are used to reduce emissions; after this, jewelry accounts for the majority of demand
• Auto sales and production numbers are also determinants of platinum’s price
• Platinum mines are heavily concentrated in two countries: South Africa and Russia; This places much more pressure on the platinum market.

Jeff Nielson for DNA reports that the direction of the precious metals markets are not easy to determine in the short term. The longer the time horizon (and the larger the data stream), the more predictable are the movements of companies, commodities, and overall markets.

Various ETFs that give exposure to precious metals:

• E-TRACS UBS Long Platinum ETN (NYSEArca: PTM)
• iPath Dow Jones AIG Platinum TRSub Index (NYSEArca: PGM)

In addition to specific exposure to metals ETFs, investors can also find broad metal ETFs that hold either the metals themselves, futures contracts or the stock of companies involved in the production of these metals:

• PowerShares Global Gold & Precious Metals (NYSEArca: PSAU)
• SPDR S&P Metals & Mining (NYSEArca: XME)
  
• Emerging Global Shares DJ Emerging Markets Metals & Mining Titans (NYSEArca: EMT)
• PowerShares DB Precious Metals (NYSEArca: DBP)
• iPath Dow Jones AIG Precious Metals TR Sub Index (NYSEArca: JJP)
  

For more stories about precious metals, visit our precious metals category.

For full disclosure, Tom Lydon’s clients own shares of GLD and SLV.

High gold prices, recently touching $1,049.70, suggest that investors are still concerned with a pending inflationary period because of excess government spending and lax monetary policies, remarks Pham-Duy Nguyen for Bloomberg.

Could gold possibly go higher? Some think so.

Deutsche Bank AG suspects that gold may reach $1,100 in 2010, and Mark O’Bryne, executive director at GoldCore Ltd., thinks gold may reach $2,000 on demand for a hedge against financial risk. Phillip Gotthelf, president of Equidex Brokerage Group Inc., expects gold to hit $1,250 by the end of the year. Gotthelf says gold is gaining because investors are using it as a hedge against changes in world monetary standards.

According to BBC News, certain factors are pushing up gold demand and prices, including:

• Weak dollar. Low interest rates and copious economic support packages have depreciated the dollar. Currency traders are turning away from the dollar in hopes of gaining value elsewhere.
• Speculation. Institutional hedge fund investors are pouring money into gold. People are also borrowing money at low rates and turning it around into the gold market.
• Inflation. You may have recall hearing about gold being a hedge against inflation.
• Psychology. Gold has traditionally been a safe-haven investment that gives people comfort in uncertain times.
• Seasons. China and India buy gold during their traditional holiday seasons as gifts. Farmers in the region also use gold as a way to store profits after harvests.

• SPDR Gold Shares (NYSEArca: GLD): up 18.3% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 18.2% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 16.8% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): up 5.4% since Sept. 9 inception

For more information on gold, visit our gold category.

For full disclosure, Tom Lydon’s clients own shares of GLD.

Max Chen contributed to this article.

Investors are able to easily invest in gold through the use of ETFs and more are doing as inflationary worries rise and the dollar depreciates, writes Ben Baden for U.S. News & World Report. In an interview with Jim Wiandt, publisher of IndexUniverse, Baden uncovers what gold ETFs offer for the average investor.

• Physical gold? Premiums in purchasing physical gold and buying gold certificates have been historically expensive. By using ETFs, gold investors have an easy and practical way to gain access to gold bullion.
• Gold ETFs. The gold-related ETFs that hold gold buillion don’t have any major differences, Wiandt says. They are similar and priced identically. The only difference is that one ETF may hold gold in Switzerland as opposed to being held in London. Gold-nuts are the ones who worry about whether the government would ever appropriate gold stores. Wiandt thinks this is highly unlikely and fantastical.
• Historic trends. History has shown that gold is usually a great hedge when markets go down, with lots of risk and fear in the markets. But the recent financial crisis pulled gold down, which was probably because of the overall deleveraging process.
• Gold vs. gold miners. The difference between gold ETFs and gold miner ETFs is that gold mining funds often hedge movements in the price of gold, so the price of gold does not wildly affect the companies. Gold mining stocks are more volatile, and higher volatility can mean higher profits on the upswing.
• Gold environment. Generally speaking, dollar-bearish environment and high possibility for inflation is a gold-bullish environment. There are talks of gold reaching new, unforeseen heights but that would take a long time. The current economic situation is in favor of gold, but an investor needs to consider the current historically high price level of gold.
• Portfolio allocation. Gold is typically put in a portfolio as a hedge in case the markets turn sour. Wiandt doesn’t recommend putting a high percentage of one’s portfolio in gold. Commodities exposure usually means around 5%.
• Volatility. Gold volatility is perceived as volatile as currency fluctuations, but the reality is that gold is less volatile than stocks.

• SPDR Gold Shares (NYSEArca: GLD): up 13.1% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 13.1% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 11.8% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): recently launched ETF

For more information on gold, visit our gold category.

For full disclosure, Tom Lydon’s clients own shares of GLD.

Max Chen contributed to this article.

Long-term outlook on precious metals typically focuses on the low correlation between gold and other asset classes, which has recently been seen as investors sell off equities in favor of precious metals, remarks Geoff Considine, Ph.D., for Advisor Perspectives.

Like most assets, gold goes through periods of both high and low performance. Gold, however, has been maintaining an historic run-up in value and generating unsustainably high returns, Considine says. He suggests taking a small leveraged position in a gold ETF to provide exposure to the upside but also have a floor in the case of a steep plunge in prices. An alternative for those seeking exposure to gold but are concerned with possible declines would be to establish a floor by buying call options.

Gold is beneficial to an investor’s portfolio because of its low correlation to major asset classes. An asset class with low correlations and positive expected returns to a portfolio may result in increased expected returns without higher risk.

Investors may not be investing in gold as a response to inflation fears but as a behavioral bias toward a “safe” store of value. Considine suggests that the run-up in gold is most likely because of  performance-chasing. Historical data shows gold is selling at a premium relative to other commodities and inflation-protected bonds.

The case that a run-up in gold prices as a response to risk of inflation is not as eminent because some inflation-trackers have been declining or lagging behind gold. If you’re an investor taking the long-term approach, gold as a diversifier still holds true. Recent highs and implied volatility in gold prices may make gold riskier for the next couple of years.

Whatever the reasons behind gold’s run-up, the trend is clearly up and you can’t fight it. Gold ETFs also vastly simplify investing in this precious metal. If you’re investing in gold, use the 200-day moving average as a guide and have a stop loss in place in the event that this trend reverses itself.

• SPDR Gold Shares (NYSEArca: GLD): up 14.3% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 14.2% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 12.8% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): down 2.3% in the last week; recently launched ETF

For more information on gold, visit our gold category.

Max Chen contributed to this article.

For full disclosure, Tom Lydon’s clients own shares of GLD.

Gold has held onto its $1,000/ounce price level but in real, or inflation-adjusted, terms, the precious metal is short of its all-time high, writes Paul Amery for IndexUniverse. After adjusting for the effects of U.S. consumer price inflation, it is calculated that gold’s 1980 peak price of $850 roughly equals $2,358 today.

Daniel Brebner and Deutsche Bank attribute inflation, inflation volatility and the performance of the U.S. dollar as the main drivers of gold prices. Brebner argues that gold does well in deflationary periods when gold is seen as a safe haven, and in inflationary environments when gold is hedged against money over supply. He sees periods of disinflation, or moderating inflation, as the bane of gold prices.

Currently, there are inflationary and deflationary voices in the market. But, Brebner sees that uncertainty over future price levels means inflation volatility, which he has said is bullish for gold.

Investor demand for gold is on the rise. China is seen as likely to purchase a hefty chunk of the world’s gold as it seeks to accumulate hard metal assets. And, of course, demand for gold ETFs is also increasing as gold investments become more popular.

Deutsche Bank says that if there is moderating risk premiums, low but contained inflation and recovery from financial crisis, gold could drop back to $650/ounce. If the markets are less benign, on the other hand, gold prices could reach up to $2,500.

Meanwhile, a pullback for silver is seen as in the cards after the recent run-up, reports Geoff Candy for Mineweb. RBC Capital Markets feels that despite the pullback they’re predicting, they’re still feeling positive about the metal because of a weakening U.S. dollar, which could continue to boost the price of precious metals. They also feel that growth in the industrial sector and investment demand will offset the drop in demand for silver in photography.

• SPDR Gold Shares (NYSEArca: GLD): up 14.2% year-to-date

• iShares COMEX Gold Trust (NYSEArca: IAU): up 14.2% year-to-date

• PowerShares DB Gold (NYSEArca: DGL): up 12.8% year-to-date

• ETFS Gold Trust (NYSEArca: SGOL): launched earlier this month

For more information on gold, visit our gold category.

Max Chen contributed to this article.