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.
“Both gold and the dollar were moving in a similar type of triangle pattern. As they were approaching the apex it was clear that a new trend was about to start,” according to ETF Daily News. “Two weeks ago, gold started a breakdown, right at a time when gold miners flashed a bearish sign, leading us to conclude that gold would start a bearish trend. However, after two weeks, gold came back and re-entered its triangle pattern again, see the first chart. That happened right on the same day when the dollar broke down.”
Rising inflation could also prove to be a catalyst for gold ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.