The pullback in gold prices to under $1,800 an ounce is testing the conviction of investors who chased the rally with exchange traded funds.
SPDR Gold Shares (NYSEArca: GLD), the largest precious metals ETF with about $71 billion in assets, was up about 28% year to date through Wednesday’s close as investors have sought shelter from Europe’s debt woes and economic uncertainty.
However, gold and silver ETFs have traded lower this week and broken support trend lines from the summer. [Gold, Silver ETFs Break Support Lines]
Gold exchange traded product holdings rose to 2,149.5 tons on Wednesday, Bloomberg reported. Assets reached a record 2,216.8 tons on Aug. 8.
Despite the recent rough patch, gold prices remain high “and there are a number of factors that support the idea that it will stay there; among them, the mounting fear of another recession,” the Associated Press reported this week.
Still, the volatility in precious metals is a reminder that timing the market with gold and silver ETFs is very difficult.
“The big question right now is when to jump in,” the AP report said. “As demonstrated in recent weeks, gold prices react very quickly to economic news.”