Pros Not Convinced by Gold ETF Rally

The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) confronted challenges to end 2016, but have been solid performers to start the new year. For example, the big physically-backed gold ETFs are higher by more than 3% over the past week.

However, data suggest some professional traders are not convinced by gold’s modest bullishness to start 2017.

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.

In the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates as many as three times this year, gold prices could move modestly higher with some help from emerging markets, namely China and India.

“Gold is up $60 an ounce since hitting post-US election lows of $1,124 mid-December, but remains down just over $150 from an initial but brief surge on election night as results showed a likely victory for Trump in the presidential race,” reports Frik Els for “According to a survey by Bloomberg released on Friday, gold traders are the most bullish in over a year predicting strong gains in 2017 following a 8.7% rise of the course of 2016.”