A new year has brought a renaissance of sorts for gold exchange traded funds and gold’s restored luster is crimping traders that have bearish on the yellow metal.
With the SPDR Gold Shares (NYSEArca: GLD), the world’s largest gold ETF, up nearly 8% to start 2015 and the Market Vectors Gold Miners ETF (NYSEArca: GDX) and the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) ranking as two of the best non-leveraged ETFs of any stripe to this point in the new year, those bearish on gold are paying a steep price.
Gold is now eying a move to $1,300 per troy ounce, which could further complicate matters for traders betting against the yellow metal.
“Taking a look at GLD’s chart, shows an Inverted Head and Shoulders Pattern with a projected target around $130, but it’s got to get through resistance at $121 first,” according to Captain John Charts.
Chart Courtesy: Captain John Charts
After the Swiss National Bank shocked financial markets by scrapping the franc’s peg to the euro, GLD gained about 3% last Thursday, moving above its 200-day moving average for the first time since September, stoking speculation that the franc’s rally could spark a commodities countertrend that would ignite a raft of short covering across the commodities complex. [Swissie Could Stoke Commodities Rebound]
“Aggregate open interest in gold futures on Jan. 15 surged 5.6 percent, the most since October 2009. Gold climbed to a four-month high on Friday, while call options for the right to own February futures at $1,300 an ounce soared sevenfold in two days,” report Joe Deaux and Laura Clarke for Bloomberg.
After losing $3.2 billion in assets last year, one of the worst totals among all ETFs, GLD saw inflows of nearly $504 million, a number surpassed by just four other ETFs. Investors have poured nearly $244 million combined in to GDXJ and GDX, the latter of which is coming off one of its best weeks since coming to market in 2006.
“It has been a decent 3 weeks for the Gold miners ETF (GDX). Actually one of the best three weeks since the ETF was created back in 2006! All of this is taking place at the same time the Gold is attempting to break above a multi-year falling channel,” according to Chris Kimble of Kimble Charting Solutions.
Both GDX and GDXJ are up more than 20% to start 2015. [A Stellar Week for Gold Miners ETFs]
Market Vectors Junior Gold Miners ETF
Tom Lydon’s clients own shares of GLD.