Gold and bullion-related exchange traded funds are experiencing their best rally since January as the depreciating U.S. dollar helped support the gains.
Over the past week, SPDR Gold Shares (NYSEArca: GLD) rose 3.1%, iShares Gold Trust (NYSEArca: IAU) added 3.0% and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) returned 3.0%. After the recent surge, the gold ETFs are now trading back above their 200-day simple moving average. [Gold ETFs Look for More After Recent Rally]
COMEX gold futures were up 0.2% Monday, hovering around $1,227 per ounce.
Gold prices are strengthening on the depreciating U.S. dollar as the weaker U.S. consumer confidence and factory production weighed on the greenback over the past five weeks, reports Marvin G Perez for Bloomberg.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, has declined 5.3% over the past month. However, the USD was strengthening against foreign currencies Monday and might begin to rebound after the back-to-back weekly selling. [Recent Weakness in Dollar ETFs Only a Minor Setback]
Now, while the economy faltering, some market observers argue that the Federal Reserve could push off on tightening its monetary policies. Consequently, without a central bank stepping in, inflation could begin to pick up, increasing gold’s appeal as a better store of value, especially in a low interest rate environment.
“Right now, it would be a pretty interesting entry point, if you are a long-term investor,” Lara Magnusen, portfolio manager at Altegris Investments Inc., said in the article. “We are shifting out of the fear of deflation, and moving into more of a reflationary world.”