Gold ETFs Could Have Plenty of Room to Run

  • Gold exchange traded products do not lack for superlatives in 2016
  • GLD, the world’s largest physically-backed gold ETF, is up about 17% this year
  • Gold prices strengthen as market volatility triggers safe-haven demand

The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU), the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold exchange traded products do not lack for superlatives this year.

GLD, the world’s largest physically-backed gold ETF, is not only this year’s top asset-gathering ETF, but it is also up about 17%. Although gold has delivered tidy gains in a short time frame, the charts say the yellow metal could easily run some more.

Gold prices strengthened this year as market volatility triggered safe-haven demand. Nevertheless, more long-term investors who are seeking insurance through a gold play should not throw everything into the precious metal. A portfolio allocation of about 5% is adequate for a partial hedge against any more trouble ahead.

“According to Mark Newton, principal at Newton Advisors, the metal could soon be trading at prices not seen in two years. Looking at a chart of gold going back to 2014, Newton sees bullion prices breaking well above a significant trend line in place for over a year as a result of a dropping interest rates and a falling U.S. dollar,” reports Yahoo Finance.

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. China and India are the world’s two largest gold consumers. According to the World Gold Council, India imported 891.5 tons of gold in 2014 while demand was 811.1 metric tons. The council believes consumption will increase to between 900 tons and 1,000 tons this year. [India Unlikely to Stem Gold’s Decline]