It has been a long, tough road for physically-backed gold exchange traded funds. Since peaking in early August 2011, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have each lost more than 31%.
Now, the yellow metal, in the eyes of some market observers, looks undervalued.
“In its latest fund manager survey, Bank of America Merrill Lynch noted that on a valuation basis, gold was viewed as ‘undervalued’ by fund managers for the first time since August 2009,” according to Business Insider.
Unfortunately for gold bugs, Bank of America Merrill Lynch does not see bullion as grossly undervalued, saying gold is undervalued by 1%, reports Business Insider.
GLD and rival gold ETFs are struggling even as demand from marquee international is forecast to rise this year. Capital Economics also projects gold demand from China and India, the two largest gold consumers, to rise by 8% and 11% year-over-year, respectively, which could help boost gold prices to $1,400 per ounce. [China Volatility Should Bode Well for Gold ETFs]
However, gold ETFs have recently failed the volatility, falling as global markets fretted about plunging Chinese equities and Greece’s potential departure from the Eurozone. Even speculation in some corners that the Federal Reserve could put off raising interest rates until next year has not buoyed gold ETFs. Over the past month, each of the aforementioned funds is down more than 1%. [U.S. Economic Uncertainty Brings Out Gold ETFs’ Luster]
Some gold traders argue that loose monetary policies overseas, such as in Europe and Japan, are stoking inflationary pressures. Consequently, overseas traders could be loading up on gold as well to help maintain wealth if consumer prices were to surge or their respective currencies begin to lose value.
Investors have added $120.2 million to GLD this year.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD. ETF Trends editorial team contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.