Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), have recently encountered some headwinds, but their year-to-date performances are still solid.
That is particularly true when considering first-quarter demand for bullion declined year-over-year. 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.
“Global gold demand in Q1 2017 was 1,034.5t. The 18% year-on-year decline suffers from the comparison with Q1 2016, which was the strongest ever first quarter. Inflows into ETFs of 109.1t, although solid, were nonetheless a fraction of last year’s near-record inflows. Slower central bank demand also contributed to the weakness. Bar and coin investment, however, was healthy at 289.8t (+9% y-o-y), while demand firmed slightly in both the jewelry and technology sectors,” according to the World Gold Council.