The SPDR Gold Shares (NYSEArca: GLD) and other gold-related exchange traded products have been in rally mode and some market observers believe the combination of increased geopolitical concerns and the weak dollar could continue boosting bullion.
Gold saw renewed safe-haven demand, especially as more traders grow cautious on speculation that Trump’s policies may not move forward in a timely fashion.
“The yellow metal closed above $1,270 an ounce last week for the first time since soon after the November presidential election. A “golden cross” has not yet occurred, with the 50-day moving average still below the 200-day, but such a move appears likely in the next few trading sessions if upward momentum can be sustained,” reports ETF Daily News.
Gold’s recent bullishness is impressive when considering that the Federal Reserve raised interest rates earlier this month, setting the stage for two more rate hikes later this year. However, the yellow metal has been boosted by the dollar’s disappointing showing this year.
Investors are displaying some enthusiasm for gold ETFs. For example, ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) has added nearly $5.6 million in new assets this year. GLD, the world’s largest gold ETF, has seen year-to-date inflows $874.2 million in new capital.
Gold prices could move modestly higher with some help from emerging markets, namely China and India. However, the dollar has recently retreated in noticeable fashion, helping aid gold’s ascent along the way.
“Fueled also by geopolitical tensions associated with Syria, Russia and North Korea, gold demand is on the rise, with last Tuesday’s trading volumes on gold calls surging 10 times Monday’s amount on the New York Mercantile Exchange,” reports ETF Daily News. “With the U.S. ramping up military action overseas, including its dropping of a devastating bomb in Afghanistan on Thursday, many investors are lightening their risk assets in favor of “safe haven” instruments such as gold and Treasuries.”
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.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.