ETF Trends
ETF Trends

We all know that the price of gold and gold exchange traded funds (ETFs) have been on an upward trend for awhile now, but not everyone knows why this matters and how it works.

David Mckay, the executive editor of Miningmx, sat down with News24 and explained it. Mckay says gold’s price is affected by several factors, including its lure for investors seeking tangibles when the dollar weakens. Global economic worries and political turmoil send investors to gold, as well. Most recently, the mining slowdown has decreased the supply.

The supply deficit has kept an underlying fear, and banks have been fed by the ground stocks. Mckay adds that banks are not selling their gold into the market, adding to the appreciation.

In South Africa, a higher gold price translates into security: the economy is stronger, mining jobs are safer and it’s good for those who invest in South Africa’s gold mining companies through the Market Vectors Gold Miners (GDX), for example.

Gold has retreated from its record levels, and in intraday trading, it fell to $913.30.

The power crisis in South Africa, meanwhile, has also affected the supply of platinum, and analysts predict that the deficit is likely to widen to 470,000 oz. by the end of this year. Deficits for platinum have been the norm since 1999 – the last time there was a surplus was in 2006. South Africa is responsible for 80% of the world’s platinum output, reports Reuters. Production problems are likely to continue and strong prices keep investors coming to the precious metal.

This situation only further underscores why there’s no platinum ETF in the United States. With the demand outpacing the supply, investors could easily corner the market.

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.