After hitting new record highs, the price of gold seems to be stuck on the “pause” button. So why then are investors still flocking to the exchange traded funds (ETFs) that hold the metal?
Gold ETFs are touted for their ease of trading and low expenses, giving them a go-to allure for investors who prefer not to hold any actual physical gold. Even investors who normally wouldn’t buy gold are doing so, thanks to the advent of gold ETFs, reports Heather Struck for Forbes. [Where are gold ETFs going to go in 2010?] What gives?
- Assets and trading volumes in these gold funds are richer with the appreciating price of gold this year, and, meanwhile, the price per share in these funds is roughly 1/10 of the spot price of gold. [How precious metals are taxed.]
- There’s also increasing sentiment that the price of gold is poised for another climb. One gold mining executive said today that a gold supply shortage coupled with a greater money supply could push the metal past $2000 an ounce by the end of 2010, reports Reuters.
- Inflows in commodity ETFs are approaching $55 billion this year. The role that gold has played as a physical commodity is significant on a global level. There is $65 billion in gold ETF assets under management in global markets today. Most of thees inflows began this year, as gold’s attracted the interest of many investors. [How to spot an investment bubble before it’s too late.]
- Institutions are taking profits in gold right now, decreasing their holdings in the SPDR Gold ETF by 25 tonnes. However, non-institutional purchases have accounted for 51 tonnes of gold, which is easing the pressure on gold’s price, reports Jonathan Ratner for the National Post.
For more stories about gold, visit our gold category.
- iShares COMEX Gold Trust (NYSEArca: IAU): up 23.5% year-to-date
- PowerShares Global Gold & Precious Metals (NYSEArca: PSAU): up 41.1% year-to-date
- SPDR Gold Trust (NYSEArca: GLD): up 23.6% year-to-date
- ETF Securities Gold Trust (NYSEArca: SGOL): up 8.7% in the last three months
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.