For those banking on the Midas touch, investors of gold exchange traded funds (ETFs) are receiving mixed reviews on the potential outlook for gold. But overall, analysts seem to be in agreement that prices will remain at least where they are for now, if not shoot much higher.
But just how high is the question.
If ETF holders are building wealth, then this area of demand should create a hefty growth in price for gold in the long-term, writes Rob Mackinlay for InvestEgate.
A gold report from Ambrian Capital states that recent retail buying of physical gold from disinvestment of .4 tonnes in second quarter of 2008 to 150 tonne demand in third quarter was a panic buying frenzy that could result in a reverse panic sell. But even Ambrian cautioned investors not to rely on that analysis.
If gold were to reach $1,500, ETF buying would have to increase five times to meet the 1,250 tonne drop in jewelry demand. Jewelry is the mainstay of current gold consumption.
Ambrian analysts claim that by 2009 they do not expect sustained moves above $1,000 per oz. Ben Davies, a gold hedge fund manager and director for Hinde Capital, thinks gold could be in the $750-$1,100 market for some time.
Citigroup’s (C) gold analysts predict gold could reach as high as $2,000, but do not expect this to be anytime soon. JPMorgan (JPM) analysts expect gold prices to rise significantly if confidence in currencies drop.
Investors who are feeling similarly bullish on gold might find some of these ETFs interesting:
- SPDR Gold Trust (GLD): down 6.7% year-to-date
- PowerShares DB Gold Fund (DGL): down 8.5% year-to-date
ETF Trends recently instituted the 50-day moving average strategy in light of the market conditions. When a fund moves above its 50-day trend line, we’ll invest 25%; once that initial investment appreciates 5%, we’ll invest another 25%. By then, the 200-day moving average should be in sight. The 50-day moving average will also be our sell point, as well.