The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) are still among this year’s best-performing non-leveraged commodities exchange traded products. But over the past month, the major gold ETFs are each off about 2.5%.
A few minor bumps in an otherwise bullish road for bullion is not preventing some analysts from making overtly bullish calls on the yellow metal. Gold and gold-related assets, including miners exchange traded funds, fell after the release of the Federal Reserve’s July meeting minutes that revealed the U.S. central bank is comfortable with the idea of raising interest rates.
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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.
Specifically, investment in gold jumped to 448 metric tons in the second quarter, or more than double the figure of the same period year-over-year, largely due to a year-over-year increase in ETF investment to 236.8 metric tons, compared to a 23 metric ton outflow the year prior.
[related_stories]Bullish gold “positions were subsequently trimmed and according to the CFTC’s weekly Commitment of Traders data up to August 30 released on Friday speculators added to shorts and cut to longs for a net reduction in bullish bets of 2.7 million ounces to 23.8 million ounces or 740 tonnes,” reports Frik Els for Mining.com.
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Macquarie thinks investors are tiring of “fixed income markets that don’t generate income, and a stock market rally that has run out of steam amid anemic economic growth. World governments could resort to drastic measures if commodities like gold or cryptocurrencies begin to gain real steam,” according to ETF Daily News.
“That’s down nearly 50 tonnes from its peak which topped managed money investors’ holding on the gold derivatives market in New York of August 2011 when gold was peaking at an all-time high of $1,900,” according to Mining.com.
Gold has found support from the weaker greenback, however the enthusiasm could be tempered by uninspiring economic data in the US and overseas. Japan’s flat GDP growth and weaker retails sales in the US have cast doubt over global economic growth, which limits Gold’s potential as an inflation hedge,” according to OptionsExpress.
For more information on the gold bullion market, visit our gold category.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.