Gold ETF Rally Could Encounter Headwinds

Gold exchange traded funds, such as the SPDR Gold Shares (NYSEArca: GLD), are enjoy small resurgences in October, but some market observers see that upside confined to the near-term.

The safe-haven status of gold, which has been questioned at various points this year, appears to have been renewed over the past couple of days amid heightened equity market volatility. The recent rally in gold comes amid extreme short positioning in the yellow metal and could force traders that short the yellow metal to cover those positions, likely adding to bullion’s near-term upside.

GLD, the world’s largest ETF backed by holdings of physical gold, is up nearly 2.60% this month, but those gains could be limited going forward.

“Gold’s surge to July highs is creating a bright spot in the market as U.S. stocks struggle,” reports CNBC. “However, John LaForge of the Wells Fargo Investment Institute believes the rally will trip up investors in a matter of months — if not weeks.”

Related: A Sticky Situation for Gold Bears

Important Gold Projections

September market the sixth consecutive month of losses for gold and some technical analysts believe the yellow metal needs to steady above the $1,200 to $1,210 per ounce area to encourage short covering, which stoke a swift rally.