Once among this year’s hottest assets, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold exchange traded products have recently been drubbed.
Over the past month, the big-name gold ETFs have incurred double-digit losses and gold’s weakness over that span is prompting some analysts to lower their 2017 forecasts on the yellow metal.
Now, the yellow metal and the aforementioned ETFs turn their attention to Federal Reserve’s December meeting, which is widely expected to deliver the central bank’s first interest rate increase of 2016.
“It was back in October that Credit Suisse said it expected gold to rise above $1,400 next year. But amid the post-election speculation about higher interest rates and with ETF buying “showing cracks,” those same analysts have cut their full-year 2017 forecast from $1,438 to $1,338 a troy ounce,” reports Johanna Bennett for Barron’s.
There are avenues for those looking to profit from more downside in gold. For instance, the ProShares UltraShort Gold (NYSEArca: GLL) provides a two times inverse or -200% daily performance of gold bullion.
Alternatively, ETN options include the DB Gold Double Short ETN (NYSEArca: DZZ), which tries to generate the twice inverse or -200% return of the daily performance of gold; DB Gold Short ETN (NYSEArca: DGZ), which tries to reflect the inverse of gold price movements; and VelocityShares 3x Inverse Gold ETN (NYSEArca: DGLD), which tries to reflect the performance of three times the inverse or -300% daily performance.
Investors widely expected gold to rally if Republican Donald Trump won the presidential election earlier this month, which he did, but that thesis proved incorrect. Democratic challenger Hillary Clinton may have actually been the preferred victor for gold ETFs because historical data suggest gold performs better when Democrats are in the White House.
“Gold supply/demand equation forecast to improve in 2017: Significant ETF demand in 2016 has masked a weak year for jewelry as India undergoes a number of (temporary in our view) dislocations in its market. The government’s Nov. 8th decision to cancel 85% of the bank notes in circulation in an effort to fight black market money and counterfeiting is likely to harm the jewelry industry in the near term, although we see this action as supporting the investment case for gold over currency in India (India Strategy),” according to part of a Credit Suisse note posted by Barron’s.
For more information on the gold market, visit our gold category.