Gold exchange traded funds are shining brighter, with bullion prices touching a 16-week high, as safe-haven demand supports gold’s allure.
The SPDR Gold Shares (NYSEArca: GLD) is up 9.9% year-to-date. [Gold ETFs Shaking Off 2013′s Rout]
COMEX gold futures now hover around $1,338 per ounce after falling 28% over 2013.
“There is some safe-haven buying because of continued signs of slowing growth in the U.S.,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates, said in a Bloomberg article. “Concerns about Ukraine remain.”
U.S. economic activity for January was at a negative 0.39, compared to analysts’ median estimates of minus 0.2 – anything below-zero indicates below-trend growth.
Meanwhile, an interim government has been set up in Ukraine, following violent riots and subsequent ousting of President Viktor Yanukovych.
Bullion prices have also been strengthening despite the Federal Reserves’ decision to continue tapering its monthly bond purchasing program.
“The market is only reacting over U.S. figures,” Bernard Sin, head of currency and metal trading at bullion refiner MKS SA, said in the article. “The political situation has been rather tense. There’s some speculative interest in going into gold as a safe haven.”
Gold has typically been used to hedge against inflation or maintain a store of value in times of depreciating currencies. However, the precious metal is turning into a bet on fear, and gold analysts warn that gold prices could turn lower as fear subsides.
“Gold goes up as an insurance policy and then it is sold at a loss when people no longer want insurance,” Rhona O’Connell, head of metals research and forecasts at Thomson Reuters GFMS, said in a Wall Street Journal article.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of GLD.