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.”
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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.
“Gold climbed about 1 percent on Tuesday to close at $1233.20 an ounce. It is now up more than 3 percent over the past two months, but off about 6 percent this year,” according to CNBC. “LaForge estimates the bearish period will last another three to five years. He sees choppy trading dominating the environment, with prices predominantly in the $1,050 to $1,350 range.”
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Investors have recently shown some interest in gold and GLD. The gold ETF has added nearly $227 million in new assets since the start of the current quarter after suffering large outflows through the first three quarters of 2018.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.