The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and rival gold exchange traded products have already notched some impressive performances this year, but some gold market observers see more upside on the way for the yellow metal.
Gold got some good news when the Federal Reserve declined to raise interest rates last week following its June meeting and the yellow metal is also being bid higher on the back of Brexit concerns. The Brexit vote determining Great Britain’s status as a member of the European Union, slated for June 23, has been widely cited in recent days as the reason investors are displaying preferences for safer assets such as gold.
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Some gold analysts see bullion’s downside as limited if Brexit is defeated, noting that any near-term retreat induced by the Brexit vote could be a buying opportunity in the yellow metal.
Demand for gold assets have surged this year. For instance, ETF flows into gold have expanded at their fastest pace since 2009. Physically backed gold ETF holdings are still one-third below the December 2012 peak, which suggest that prices can hold at about $1,200 per ounce.
[related_stories]However, emerging market demand for gold has not picked up yet. For instance, China has shown little demand, with the Shanghai Gold Exchange seeing little growth in volume. While the higher prices may have deterred Asian buyers, demand could pick up if prices persist in going higher, analysts said.
Boris Schlossberg, managing director of FX Strategy for BK Asset Management, told CNBC that if gold moves above $1,300 per troy ounce, that represents a new rally for bullion.
“If we can break above $1,300, we could have a new rally in gold, because the market is going to essentially assume that the Fed will stay stationary until December,” he said Wednesday on CNBC’s “Trading Nation. “Investors are looking anywhere to park their funds where there is yield.”
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Some analysts still believe that is possible gold ascends to $1,500 per troy ounce. Gold bullion prices have surged almost 20% this year as the Fed previously signaled it would slow the pace of interest rate normalization this year – higher interest rates typically weigh on gold prices since the hard asset provide no yield and would become less attractive to higher-yielding conservative debt assets in a rising rate environment.
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SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.