“’ETF investors may help stabilize the market because they tend to hold assets longer than hedge funds and large speculators who are more likely to react faster to events, said Michael Blumenroth, an analyst at Deutsche Bank,” according to Bloomberg.
Gold ETFs have also been grappling with the surprising results of the U.S. presidential election. 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 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.