An Important Time for Gold ETFs

With a Fed rate hike in doubt, precious metals-related assets surged Friday. An extended low-rate environment would help support gold, which pays its holders nothing and struggles to compete with yield-bearing assets if borrowing costs rise, as a more stable store of wealth, and a depressed U.S. dollar would also make USD-denominated gold cheaper for foreign buyers.

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: Bullish Forecast for Gold ETFs

“Gold has shown some signs of life this month after dropping in May following announcements of a possible summer Federal Reserve rate hike, and traders believe that the climb will continue and there’s one group of stocks that will be a key beneficiary,” according to CNBC.

For more information on the Gold ETFs, visit our Gold category.

SPDR Gold Shares

Tom Lydon’s clients own shares of GLD.