Gold ETFs to Hedge Against a Fed Surprise

Gold prices inched higher Tuesday, despite conflicting views from Federal Reserve officials. As the U.S. waits for the Fed announcement, traders may consider a bearish or inverse gold exchange traded funds to hedge against a more hawkish outlook.

On Tuesday, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were up about 0.7% while Comex gold futures were 0.5% higher to $1,354.8 per ounce.

Gold strengthened after San Francisco Fed President John Williams argued in a paper that central banks might have to raise inflation targets, focus more on growth and back much looser fiscal policies.

However, gold pared gains after New York Fed President William Dudley said a September rate hike “is possible.”

“I don’t think my views have changed very much,” Dudley told Fox Business Network. “I think we’re looking for growth in the second half of the year that’ll be stronger than the first half – so some acceleration in the growth outlook.”

SEE MORE: Record Investment Demand for Gold ETFs

Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.

Looking ahead, investors will be waiting on Wednesday’s minutes from the most recent Federal Open Market Committee meeting.