Gold focused investments and exchange traded funds have rallied on more easing measures from central banks. The Federal Reserve, European Central Bank and Bank of Japan have all announced additional stimulus in the past month with moves that could weaken their currencies.
Policies that devalue currencies are another reason to consider a physically-backed precious metal ETF. [Gold ETF Holdings Rise to Record on QE3]
“The greatest boon for gold investors has been the rise of gold bullion exchange-traded funds. Suddenly, trading in gold has become cheaper, simpler and more liquid. No more filling out forms in triplicate and being escorted to the vault to collect your bars of gold. True, ETFs don’t feel as nice as a bar of the good stuff, but then what do feelings have to do with being a rational investor? ” Vikash Jain wrote for Financial Post.
Some investors use gold ETFs to protect themselves from a weaker dollar and the Fed recently announced its third round of quantitative easing, or QE3.
“So far, gold and silver have been the main beneficiaries, rising in the week before the FOMC meeting in anticipation of more stimulative monetary policies, and then, after the announcement, reacting to the even-more aggressive monetary stimulus than even the most liberal observers had expected,” Jeffry Nichols of Rosland Capital wrote in a recent note. [Gold ETF Rally May Keep Running]
Seasonal factors may also support gold ETFs due to buying in India and China.