Gold ETFs regained some lost ground last week as traders continue to debate whether the Federal Reserve will announce additional stimulus at some point this year.
“Gold remains beholden to the communications of central banks, trading choppily in recent weeks as the market weighs the possibility of another round of quantitative easing,” said Martin Arnold and Nicholas Brooks at ETF Securities in a note Monday.
Bullion-backed ETFs such as SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were down fractionally on Monday.
“Comments by Federal Reserve Vice-Chairman Janet Yellen’s comments last week gave a boost to precious metals prices, after she indicated that the U.S. central bank is ‘willing and committed to take whatever actions are necessary’ to maintain its dual mandate of promoting maximum employment and stable prices,” ETF Securities said.
“The U.S. dollar weakened following the speech, leading to gains for all precious metals as investors gained confidence about the potential for further monetary stimulus. With currency debasement a key investment theme for gold investors, the gold price bounced off its lowest level in three months, rallying by 2%,” the analysts added.
The gold ETFs were up about 6% year to date heading into Monday’s action.
The precious metal funds started trending lower last month after Fed chief Ben Bernanke said the economy is sending mixed signals. His comments tempered speculation that more quantitative easing from the central bank is imminent. [Gold ETFs Pause on Bernanke, QE3 Talk]
However, the buy-and-hold investors in gold ETFs have remained steadfast.
“Investors in gold exchange traded funds are living up to their reputation for ‘stickiness’ as they have stuck with their holdings even as the price of bullion has retreated after hitting an all-time high in September 2011,” according to a recent Financial Times report. [Gold ETF Investors Unfazed by Pullback]
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD.