Recently, good news has been hard to come by for the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold exchange traded products. Investors should not expect that trend to change anytime soon and certainly not in the coming days.
The U.S. dollar has been strengthening on greater speculation that the Federal Reserve will begin tightening its monetary policy in December after the surprisingly strong October jobs report. Most raw materials are priced in dollars and historically a strong USD has pressured commodities.
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. [Doubters in Gold Rally]
“Driving gold’s steep decline is the increased expectation of a rate hike at the Federal Reserve‘s next policy meeting, Phillip Streible of RJO Futures said Monday. Market watchers are also keeping a close eye on the November jobs report to be released Friday as another indicator of whether the U.S. central bank will move in December,” according to CNBC.
Making matters worse for gold ETFs are expectations for soft near-term demand at a time of year when gold demand is usually strong.
“India’s gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country’s millions of farmers,” reports Reuters.
Gold futures and physically-backed ETFs have been pressure this year amid speculation the Federal Reserve is preparing to raise interest rates, which has pushed the dollar higher. Higher interest rates would diminish gold’s attractiveness since the precious metal does not pay interest like fixed-income assets.
“Ari Wald of Oppenheimer said the technicals are also pointing to more losses ahead. Gold’s 200-day moving average has been lagging despite some attempted rallies, Wald said, and resistance should come in at $1,100,” reports CNBC.
SPDR Gold Shares
Tom Lydon’s clients owns shares of GLD.