The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold-related exchange traded products have perked up in recent weeks with GLD, the world’s largest gold ETF, climbing more than 3% over the past month.
However, bullion’s bounce has not convinced all market observers that a sustained rally is in store.
Gold is seeing greater support from safe-haven demand after currency devaluations across Asia added to investment demand for a better store of value than paper currencies or stocks and bonds. Bullion was recovering lost ground after dropping to a five-year low last month on concerns that the Fed would hike rates as early as September. Obviously, a rate hike for 2015 can now only happen in October or December.
Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store.
“Gold has regained its shine in recent months, but that doesn’t change the dull outlook for the precious metal over the longer-term, warns Goldman Sachs, which sees prices falling to $1,000 in 12 months as the Federal Reserve normalizes monetary policy,” reports CNBC.
Gold has been in a 2-year bear market, which has seen failed rallies on the back of various news events. Continued strength in the US economy and labor market has offset political and economic events since the Gold market turned bearish in 2013.
“Our base case remains for higher U.S. real rates and lower gold prices, albeit with there being risks that the gold price weakness is pushed out further should the Fed surprise us and remain on hold in December,” CNBC reports, citing Goldman Sachs.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.