Gold prices have climbed above $1,900 an ounce ahead of a key speech from Federal Reserve Chairman Ben Bernanke this week in which investors will be looking for any hints of additional support for volatile markets from the Fed.
ETFs that invest in gold and stocks were advancing Monday as equities rebounded somewhat following a four-week losing streak. [Stock ETFs Start Week with Big Rally]
ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) rose 2.5% on Monday.
Aside from economic data this week including new home sales and durable goods orders, markets will also focus on the Federal Reserve’s annual retreat in Jackson Hole, Wyoming.
“Ben Bernanke is set to speak on Friday and may hint at further measures the Fed could take to boost the economy,” said David Kelly, chief market strategist at JP Morgan Funds. [Will Bernanke’s Jackson Hole Speech Save Stock ETFs?]
“However, the potential economic boost from such hints ought to be diminished by the clear failure of QE2 to spur spending in the interest sensitive sectors of the economy and the well known impotence of expansionary monetary policy in a low-inflation, low-interest-rate environment,” Kelly wrote in a weekly outlook emailed Monday. “Jean-Claude Trichet, the head of the European Central Bank, will also be attending the conference and his speech, on Saturday, will be watched for hints on both future ECB rate moves as well as an assessment of their attempts to stabilize European bond markets.”
European stock ETFs rallied Monday after their recent beating. [European Stock ETFs Pressured by Banks]
“The market’s big swings are still going strong. Last week the Dow Jones industrial average ended in the negative for the fourth week in a row, as jilted investors continued to pull billions of dollars out of stocks to wait out the storm,” writes Roya Wolverson at The Curious Capitalist. “The volatile dips are likely to continue, since major threats to the market still loom, which many on Wall Street haven’t priced in: a Lehman-like European bank run, the dissolution of the euro, a sharp slowdown in emerging markets, a double-dip recession at home.”
Investors have a long list of worries about the market but some see attractive valuations in stocks after the recent sell-off.
“For investors the unpleasantness of current volatility and fears of recession need to be balanced against current market valuations. Indeed unusually low price-to-earnings ratios on stocks and exceptionally low yields on Treasuries only seem to make sense if a very nasty recession materializes,” wrote JP Morgan’s Kelly. “Given this pricing, a balanced approach to investing still seems appropriate in a financial environment where neither market prices nor investor emotions appear to be anywhere close to being balanced.”
ETFS Physical Swiss Gold Shares
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.