When your cab driver starts giving you tips, it’s a sure sign that a market has become overheated. Have gold exchange traded funds (ETFs) reached that point?
Everybody knows that when the ordinary public get into a boom, the smart money gets out, says Brett Arends for The Wall Street Journal? To find out what’s going on in gold and who’s really doing the buying, Arends did a little digging:
- According to Financial Research Corp., a Boston firm, investors poured $7.4 billion into gold bullion ETFs through July. Most of the inflows went to SPDR Gold Shares (NYSEArca: GLD), but ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and iShares COMEX Gold (NYSEArca: IAU) also lured in a large amount of assets. [Gold ETFs Look for Next Move.]
- Most of the money came from big institutions like pension funds, hedge funds and mutual funds. According to State Street, these account for at least 45% of the investment in GLD these days.
- Individual members of the public probably accounted for only about half the new investment, or $3.7 billion. The public has also been buying gold coins and bars, about 45 metric tons of gold bars and coins in the first half of this year – which is less than they bought last year.
Whether investors keep going for the gold is a question that seems to have divided the markets. According to Gold and Investment, BlackRock says even after gold has hit new highs last week, gold prices still have a way to go.
If you’re not convinced that gold has more power left behind it, consider several of the short ETFs and exchange traded notes (ETNs) that are available, including:
- ProShares UltraShort Gold (NYSEArca: GLL)
- PowerShares DB Gold Short ETN (NYSEArca: DGZ)
Tisha Guerrero contributed to this article.
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.