The SPDR Gold Shares (NYSEArca: GLD), the world’s largest physically-backed gold exchange traded fund, has added $5.1 billion in fresh assets this year. That is $2 billion more than the second-best asset-gathering ETF.
However, GLD is just one example of investors’ affinity for gold in 2016, but bullish statistics are not keeping gold doubters at bay. Nor are gold bulls displaying too much concern about what their bearish counterparts have to say. Still, a case can be made that bullion and exchange traded funds like GLD have rallied too far too fast, meaning that if certain price points are taken out, the yellow metal could be vulnerable to technical selling.
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]
“An impressive $13.4 billion was poured into gold assets over the past 11 weeks, according to Bank of America Merrill Lynch. That’s the largest sustained weekly inflow for gold since during the 2009 financial crisis,” reports Matt Egan for CNN Money.
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.[related_stories]
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.
Still, some market observers see trouble for gold if the Federal Reserve raises interest rates, but that is not the consensus view.
“Many investors believe volatility will return later this year as the Federal Reserve attempts to raise interest rates. Others are concerned about unforeseen consequences linked to the experiments with negative interest rates by global central bankers in Europe, Japan and elsewhere,” reports CNN Money.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.