Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), the largest exchange traded product backed by holdings of physical gold, finished last week on an upbeat note, but some traders are wagering the yellow metal is in for near-term declines.

The yellow metal and ETFs such as GLD rose late last week amid speculation that the Trump Administration will not be able to execute its widely anticipated tax reform package. Investors eschewed riskier assets on those assets, instead embracing gold.

“One GLD options trader is bracing for steep losses for the malleable metal in the near term, possibly bracing for a sharp retreat following the December Fed meeting,” reports Schaeffer’s Investment Research.

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. Interest rates remain low in many developed markets and some emerging markets have been rapidly lowering borrowing costs this year.

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Data suggest options traders are betting GLD will decline due to the December Federal Reserve meeting. The Fed is widely expected to raise interest rates next month, the third such move this year. GLD options traders are speculating the ETF could decline to $110 or lower by December expiration.

“Looking at the charts, the last time the SPDR Gold Shares were seen below $110 was on the first trading day of 2017 — with GLD up 12.4% from its Jan. 3 year-to-date low of $109.37. More recently, the shares have been trading in a tight channel of higher highs and lows since late October, and are on track to close north of their 50-day moving average for just the second time since September,” according to Schaeffer’s.

Since the 1970s, gold has returned an average 10% per year, comparable to the S&P 500 average price performance. Over the past 10 to 20 years, gold has also held up, supported by important structural changes in the market, like the economic expansion of emerging markets, increased use of gold as part of foreign reserves by central banks and the rising popularity of gold-backed ETFs.

Gold’s performance has been supported by the positive effect that rising incomes have both on the jewellery and technology demand for gold and also in the form of long-term savings.

For more information on the gold market, visit our gold category.

Tom Lydon’s clients own shares of GLD.