Gold bullion and precious metal-related exchange traded funds have regained their luster this year, and hard asset may continue to shine as safe-haven demand and central bank inaction help attract investors.
ETF Trends publisher Tom Lydon recently appeared on CNBC’s Futures Now to talk the recent surge in interest for gold assets.
For instance, the SPDR Gold Shares (NYSEArca: GLD), the largest bullion-backed exchange traded fund in the world, saw $756 million in net inflows over the past week and attracted $1.7 billion year-to-date, according to ETF.com.
GLD has increased 7.7% year-to-date and is now trading back above its long-term, 200-day simple moving average. [Positive Vibes for Gold ETFs]
Comex gold futures were up 1.2% Thursday to $1,155.3 per ounce.
Speculation of higher interest rates weighed on gold ETFs last year, but traders have lowered expectations for multiple rate hikes this year after New York Fed President Bill Dudley said that financial conditions have tightened in the weeks since the Federal Reserve’s rate hike in December. Without the Federal Reserve hiking rates, the U.S. dollar has quickly depreciated, another boon for USD-denominated gold as the weaker U.S. currency makes it cheaper for foreign buyers.
Even if rates rose a couple basis points, the continued low rate environment is good for gold, which does not pay a yield and would struggle to compete with yield-generating assets when rates rise.