Gold ETFs Could be Facing Near-Term Tops

This is what happens. Stocks string together a few good days and all of sudden, traders are growing wary of gold and the related exchange traded products, such as the SPDR Gold Shares (NYSEArca: GLD).

Gold-related assets have been rallying as global volatility helped support safe-haven investments and a weakening U.S. dollar helped prop up the dollar-denominated hard asset. However, the precious metal is seeing prices fall off as investors dive back into riskier segments of the market.

GLD rose modestly Thursday, extending its year-to-date gain to nearly 15%. However, bullion’s bounce has not convinced all market observers that a sustained rally is in store. 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 been in a 3-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.

“Gold traders and analysts were bearish for the first time in seven weeks, a Bloomberg survey showed, with seven bulls outnumbered by 10 bears, and four sitting on the fence. That’s a shift from last week when there were 16 bulls, four bears and one neutral. Gold rose 14 percent this year to $1,207 an ounce by Thursday, the best start to a year since 1980,” reports Bloomberg.

A potential problem for gold this year is that some market observers believe the Fed charting a course for more rate hikes, though at a measured pace, in 2016 sets the stage for further upside in the U.S. dollar. Of course, that would be punishing for gold and other commodities, which are denominated in dollars.