It had to happen sooner or later, though some may feel it’s a little on the “sooner” side: gold exchange traded funds (ETFs) and prices have tumbled in recent weeks, off about 5% from their highs hit on June 18. What gives?
Given that gold is a safe-haven asset in times of economic turmoil or uncertainty – that is, after all, the main reason that SPDR Gold Shares (NYSEArca: GLD) surged to more than $52 billion in assets – what accounts for the decline? [Our Latest Podcast: All About Metals ETFs.]
Matt Phillips at The Wall Street Journal posits that it might be getting tough to justify buying gold with all the signs of disinflation or even deflation that have been cropping up lately. And those fears have some basis: the consumer price index declined 0.1% in June. It was the third consecutive decline.
If gold continues to decline, our simple sell strategy is to let go when an ETF drops below its 200-day moving average or 8% off the recent high. Gold is still above the 200-day, so the 8% point will be coming first. If gold does continue to head downward, do you have a sell point in place? [How to Follow Trends.]
Other popular physically-backed gold ETFs:
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.