Gold exchange traded products have not been too volatile in recent weeks. For example, the SPDR Gold Shares (NYSEArca: GLD), the world’s largest gold-related exchange traded product, is up about 1.3% over the past month and there has not been much recently happening with the yellow metal to test skittish investors.
The good news for gold ETFs is that inflation could serve as a catalyst for the yellow metal. 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.
Another possible catalyst for gold entering the back of the year is lingering debate surrounding how many times the Fed can raise rates this year – one more is what many traders are betting on, and in 2018, three seems to be the bet there.
“In the past four months, gold prices moved in a 7.6 percent range, the least in 10 years, while 120-day volatility is at the lowest since 2005. That’s amid unprecedented uncertainty over U.S. President Donald Trump’s legislative program and divisions in the U.K. over plans to leave the European Union,” reports Eddie VanDer Walt for Bloomberg.
GLD represents the fractional, undivided beneficial ownership interest in the Trust, which stores gold bullion in London vaults. The ETF currently holds about 813.8 tonnes or 26.1 million ounces of gold with a value of about $32.8 billion.
Related: 17 ETFs to Satisfy Your Gold Fever
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.
Still, gold’s recently docile nature is problematic for active, risk-taking traders that thrive on the yellow metal’s often volatile ways.
“While irritating for traders who make a living betting on strong moves, the sleepy gold market also reflects stability in other assets, with measures of global shares at record highs. Investors from currencies to equities have been boxed in between concerns over a weakening dollar and speculation that central banks will tighten money supply,” according to Bloomberg.
For more information on gold, visit our gold category.
Tom Lydon’s clients own shares of GLD.